The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production manager believes that an improved production procedure can cut cost of goods sold by 1 percent. Prepare a pro forma income statement still assuming the President's goal to increase net income by 10 percent. Calculate the required reduction in selling & administrative expenses to achieve the budgeted net income.

 

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Top executive officers of Stuart Company, a merchandising firm, are preparing the next year's budget. The controller has provided everyone with the current year's projected income statement. Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Cost of goods sold is usually 75 percent of sales revenue, and selling and administrative expenses are usually 10 percent of sales plus a fixed cost of $71,000. The president has announced that the company's goal is to increase net income by 10 percent. Required A Required B Required C Current Year $ 2,300,000 1,725,000 575,000 301,000 $ 274,000 The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production manager believes that an improved production procedure can cut cost of goods sold by 1 percent. Prepare a pro forma income statement still assuming the President's goal to increase net income by 10 percent. Calculate the required reduction in selling & administrative expenses to achieve the budgeted net income. STUART COMPANY Pro Forma Income Statement Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Reduction in selling & administrative expenses $ 2,300,000 1,702,000 598,000 296,600 x 301,400 4,400 $ $ Show less Top executive officers of Stuart Company, a merchandising firm, are preparing the next year's budget. The controller has provided everyone with the current year's projected income statement. Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Cost of goods sold is usually 75 percent of sales revenue, and selling and administrative expenses are usually 10 percent of sales plus a fixed cost of $71,000. The president has announced that the company's goal is to increase net income by 10 percent. Required A Required B Required C Current Year $ 2,300,000 1,725,000 575,000 301,000 $ 274,000 The market may become stagnant next year, and the company does not expect an increase in sales revenue. The production manager believes that an improved production procedure can cut cost of goods sold by 1 percent. Prepare a pro forma income statement still assuming the President's goal to increase net income by 10 percent. Calculate the required reduction in selling & administrative expenses to achieve the budgeted net income. STUART COMPANY Pro Forma Income Statement Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Reduction in selling & administrative expenses $ 2,300,000 1,702,000 598,000 296,600 x 301,400 4,400 $ $ Show less

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Step 1 Answer B Calculate the required reduction in selling a... View the full answer