QUESTION 3 (20)

3.1 Prepare a projected statement of comprehensive income for the year ended 31 December 2021 to determine the sales needed to produce a profit after tax that is 25% more than that for the year ending 31 December 2020.

(Where applicable round of amounts to the nearest rand) (10)

INFORMATION:

Calder Enterprises Statement of Comprehensive Income for the year ended 31 December 2020

	R
Sales	5 445 000
Cost of sales	(3 539 250)
Gross profit	1 905 750
Operating expenses	(1 122 000)
Income from operations	783 750
Interest expense	(98 900)
Profit before tax	684 850
Income tax	(191 758)
Profit after tax	493 092

Additional information:

1. Cost of sales is expected to be 60% of sales.
2. Operating expenses will increase by 4%.
3. Interest expense will increase to R120 000.
4. The tax rate will remain at 28%

3.2 Use the information from question 3.1 (not your solution) and calculate the following for the year ending 31

December 2020:

1. Gross margin (3)

2. Net profit margin (3)

3. Operating margin (2)

Interest coverage (2)