Charlie Baker, an entrepreneur, is seeking financing from a venture capital (VC) firm. The VC firm...

 

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Charlie Baker, an entrepreneur, is seeking financing from a venture capital (VC) firm. The VC firm required a pro forma (projected) income statement for the next year and Charlie provided this: Baker's Bakery Pro Forma Income Statement For next year Sales Cost of sales Gross margin Selling and administrative Income before income taxes Income taxes @30% Net income $150,000 (@$15 per unit) (90,000) (variable except for $3/unit fixed costs) $ 60,000 b. What is the current break-even point? (40,000) (including $10,000 fixed costs) $ 20,000 6,000) 14.000 Note: A "unit" could be a standard order such as two loaves of bread and a dozen rolls. Required: (Treat the situations below as independent. The price and cost behavior will be unchanged except where indicated) a. If unit sales increased by 10%, what would the net income be? c. How many units would the bakery have to sell in order to earn $21,000 net income? d. If fixed costs increased by $5,000, what net income would the bakery earn (all else remains the same)? e. Lowering the price to $14 per unit will cause sales volume to increase by 15%. What will be the net income? Charlie Baker, an entrepreneur, is seeking financing from a venture capital (VC) firm. The VC firm required a pro forma (projected) income statement for the next year and Charlie provided this: Baker's Bakery Pro Forma Income Statement For next year Sales Cost of sales Gross margin Selling and administrative Income before income taxes Income taxes @30% Net income $150,000 (@$15 per unit) (90,000) (variable except for $3/unit fixed costs) $ 60,000 b. What is the current break-even point? (40,000) (including $10,000 fixed costs) $ 20,000 6,000) 14.000 Note: A "unit" could be a standard order such as two loaves of bread and a dozen rolls. Required: (Treat the situations below as independent. The price and cost behavior will be unchanged except where indicated) a. If unit sales increased by 10%, what would the net income be? c. How many units would the bakery have to sell in order to earn $21,000 net income? d. If fixed costs increased by $5,000, what net income would the bakery earn (all else remains the same)? e. Lowering the price to $14 per unit will cause sales volume to increase by 15%. What will be the net income?

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