PROBLEM 4-8. The Profit Equation Premier Custom Computers is a small company that assembles PCs to customer specifications. The company buys all of its component parts from TechWarehouse.Com. In the past year, the company had the following before tax profit:
Sales $1,250,000 Less:
Cost of components $875,000 Staff salaries 180,000 Rent 24,000 Utilities 3,600 Advertising 2,000 1,084,600 Operating profit before bonuses 165,400 Staff bonuses 66,160 Profit before taxes and owner "draw" $ 99,240 The company, owned by Patricia Wells, has six full-time employees. These employees are each paid a base salary of $30,000 per year. In addition, they receive a bonus equal to 40 percent of operating profits before bonuses. Owner "draw" is the amount Patricia pays herself out of company profits.
The company is in the process of planning profit for the coming year. TechWarehouse.
Com has agreed that their prices to Premier will be reduced by 20 percent on all purchases over $900,000.
Required Estimate profit before taxes and owner "draw" for five levels of sales: $1,000,000;
$1,100,000; $1,200,000; $1,300,000; $1,400,000.