Top executive officers of Stuart Company, a merchandising firm, are preparing the next year's budget. The...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
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 Current Year $ 2,300,000 1,725,000 575,000 301,000 $ 274,000 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 The following items are independent of each other: a. Prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal? b. 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. c. The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $341,000. With the increased advertising, the company expects sales revenue to increase by 10 percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Will the company reach its goal? Required A Required B Required C Prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal? Note: Round "Percentage increase" to 2 decimal places. (i.e., .2345 should be entered as 23.45). Sales revenue STUART COMPANY Pro Forma Income Statement Cost of goods sold Gross profit Selling & administrative expenses Net income Percentage increase 0 $ 0 % Required A Required B Required C 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 0 Net income $ 0 Reduction in selling & administrative expenses Show less Required A Required B Required C The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $341,000. With the increased advertising, the company expects sales revenue to increase by 10 percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Will the company reach its goal? Sales revenue STUART COMPANY Pro Forma Income Statement Cost of goods sold Gross profit 0 Selling & administrative expenses Net income $ 0 Will the company reach its goal? 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 Current Year $ 2,300,000 1,725,000 575,000 301,000 $ 274,000 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 The following items are independent of each other: a. Prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal? b. 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. c. The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $341,000. With the increased advertising, the company expects sales revenue to increase by 10 percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Will the company reach its goal? Required A Required B Required C Prepare a pro forma income statement. What percentage increase in sales would enable the company to reach its goal? Note: Round "Percentage increase" to 2 decimal places. (i.e., .2345 should be entered as 23.45). Sales revenue STUART COMPANY Pro Forma Income Statement Cost of goods sold Gross profit Selling & administrative expenses Net income Percentage increase 0 $ 0 % Required A Required B Required C 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 0 Net income $ 0 Reduction in selling & administrative expenses Show less Required A Required B Required C The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling and administrative expenses to $341,000. With the increased advertising, the company expects sales revenue to increase by 10 percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Will the company reach its goal? Sales revenue STUART COMPANY Pro Forma Income Statement Cost of goods sold Gross profit 0 Selling & administrative expenses Net income $ 0 Will the company reach its goal? Show less
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
Let a function f be the line graph connecting the data points (1, 2), (4,9), and (6,3). (a) Write the formula for a piecewise-linear function f that passes through these data points whose domain is 1...
-
Joanne Quick made an investment of $10,271.38. From this investment, she will receive $1,200 annually for the next 15 years starting one year from now. What rate of interest will Joannes investment...
-
Grades of g1 = +5.00% and g2 = +1.50% VPI station 6+300 and elevation 185.920 m. Fixed elevation 185.610 m at station 6+400. (Use 100-m stationing) Field conditions require a highway curve to pass...
-
What are the characteristics of, and who benefits from, a well-run exchange?
-
Sweet Dreams Bakery was started five years ago by Della Fontera who was known for her breads, sweet rolls, and personalized cakes. Della had kept her accounting system simple, believing that she had...
-
Why are there differences between IP classranges? How can you identify the class based on the IP address? How does understanding IP addressing help you troubleshoot and fix IP addressing issues?
-
What do the following industries have in common and what are the implications for the number of surviving competitors in each - telecommunications, video streaming services, banks, airlines, stock...
-
1. What are some examples (5 examples) of where technology has been used to improve the value chain? (10 marks)
-
A bank term deposit yields 6% interest, compounded daily. Calculate, showing and briefly explaining your algebraic workings , the interest rate that would ensure the path of the account's value would...
-
Saviour company had the following transaction during its first month of operations: spent and used P30,000 and P40,000 of direct labor and manufacturing overhead, respectively, and used P14,000 of...
-
What are Cost Objects? Discuss four examples of cost objects from'Real Life' features in 'Cost Classifications: different classifications for different purposes', 'Costs across the value chain'and...
-
The Long Term Care Plus Company has two service departments actuarial and premium rating, and two operations departments marketing and sales. The distribution of each service department's efforts to...
-
Date Table: May 5 Purchase of 155 crates @71each, May 13th was a sale and sold 180 crates @98 each, May 18th Purchase 193 crates @75 each, May 26 Sale sold 200 crates @100. Same data on requirement...
-
Explain why it is not wise to accept a null hypothesis.
-
IFRS and the CPA Canada Handbook, Part II, have equal status in Canada for financial reporting.
-
Any Canadian company that uses U.S. GAAP must prepare its statements in U.S. dollars.
-
In a private corporation, the needs of external users have no impact on the companys financial reporting objectives.
Study smarter with the SolutionInn App