Your assistant has prepared the following pro forma income statement for 2010. He used your forecast sales figure as the starting point. The administrative expenses are fixed except for salaries, which are expected to increase 3%. The cost of goods sold and selling expenses vary in direct proportion to the sales. You are surprised by the larger forecast loss for 2010.

Required:
(a) Re-do the 2010 pro forma income statement to correct your assistant's work.
(b) Explain what percentage increase amounts you used to develop the corrected pro forma income statement.

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2010 Sales Cost of goods sold Gross profit Selling expenses Sales commissions Delivery expenses Patent royalties expenses Total selling expenses Administrative expenses Salaries Rent expense Insurance expense Total administrative expenses Net income s 700,200 300,000 400,200 $ 875.250 485.250 S70,020 105,030 80,000 112,000 40,000 210,060 232,000 120,000 60,000 s 135,000 72,000 14,400 192,000 S (1860)