Top executive officers of Benson Company, a merchandising firm, are preparing the next year's budget. The controller has providedeveryone with the current year's projected income statement.Sales revenueCost of goods soldGross profitSelling & administrative expensesNet incomeCurrent Year$ 2,000,0001,500,000500,000273,000$ 227,000Cost of goods sold is usually 75 percent of sales revenue, and selling and administrative expenses are usually 10 percent of sales plusa fixed cost of $73,000. The president has announced that the company's goal is to increase net income by 10 percent.RequiredThe 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 productionmanager believes that an improved production procedure can cut cost of goods sold by 1 percent. Prepare a pro forma incomestatement 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 andadministrative expenses to $313,000. 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 companyreach its goal?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 revenueBENSON COMPANYPro Forma Income StatementCost of goods soldGross profitSelling & administrative expensesNet incomePercentage increase690$0%The market may become stagnant next year, and the company does not expect an increase in sales revenue. The productionmanager believes that an improved production procedure can cut cost of goods sold by 1 percent. Prepare a pro forma incomestatement 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.Sales revenueCost of goods soldGross profitBENSON COMPANYPro Forma Income StatementSelling & administrative expensesNet incomeReduction in selling & administrative expenses0$0Show less▲The company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling andadministrative expenses to $313,000. With the increased advertising, the company expects sales revenue to increase by 10percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Willthe company reach its goal?BENSON COMPANYPro Forma Income StatementSales revenueCost of goods soldGross profit0Selling & administrative expensesNet income$0Will the company reach its goal?Show less▲

Income Statement-A pro forma income statement is a document that displays a company's estimated…

Answered: Required The following items are…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Changes in Cost Structure; Break-Even Analysis; Operating Leverage; Margin of Safety Morton Company’s contribution format income statement for last month is given below: The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to year according to general economic conditions. The company has a large amount of unused capacity and is studying ways of improving profits. Required: 1. New equipment has come onto the market that would allow Morton Company to automate a portion of its operations. Variable expenses would be reduced by $9 per unit. However, fixed expenses would increase to a total of $225,000 each month. Prepare two contribution format income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. Show an Amount column, a Per Unit column, and a Percent column on each statement. Do not show percentages for the fixed expenses.…
Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable expenses are $10 per unit, and fixed expenses total $190,000 per year. Its operating results for last year were as follows: Sales (23,900 units) Variable expenses Contribution margin Fixed expenses Operating income $ 460,000 230,000 230,000 1990,000 40,000 $
The Southern Division manager of Texcaliber Inc. is growing concerned that the division will The division manager has come to Aston Melon, the divisional controller, to determine exactly for internal profit reporting and had an appropriate level of inventory at the beginning of the period. The division manager knows that he can boost profits by increasing production at the end of the period. The increased production will allocate fixed costs over a greater number of units, reducing cost of goods sold and increasing earnings. Unfortunately, it is unlikely that addi- profit objectives. Aston analyzes the data and determines that the division will need to increase inventory by 30% in order to absorb enough fixed costs to meet the division's income objective. how much additional production is needed to increase net income enough to meet the division's Chapter 7 Variable Costing for Management Analysis ke It Further TIF 7-3 Salesper Bon Jager Inc. ma TIF 7-1 Absorption costing operating…
I am struggling to figure out what I am doing wrong to correctly answer 7.
The President of Leyesa Corporation was informed that production costs were 3% lower in 2023 than that of 2022. Statistics shown by the selling division indicated that the quantity sold in 2023 was significantly greater than quantity sold in 2022. The President is wondering why, despite the favorable information provided by the selling and production division, gross margin for 2022 was still higher than that of 2023 as shown below: December 31, 2020 December 31, 2019 Net Sales 1,305,00 1,160,000 Cost of Sales 843, 900 696,000 Gross Margin 461, 100 464,000
The South Division of Wiig Company reported the following data for the current year. Sales Variable costs Controllable fixed costs Average operating assets $2,950,000 1,947,000 2. 595,000 Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action. 3. 5,000,000 1. Increase sales by $300,000 with no change in the contribution margin percentage. Reduce variable costs by $155,000. Reduce average operating assets by 4%. (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%)
17 The Manning Company has financial statements as shown next, which are representative of the company's historical average. The firm is expecting a 35 percent increase in sales next year, and management is concerned about the company's need for external funds. The increase in sales is expected to be carried out without any expansion of fixed assets, but rather through more efficient asset utilization in the existing store. Among liabilities, only current liabilities vary directly with sales. Sales Expenses Earnings before interest and taxes Interest Earnings before taxes Taxes Earnings after taxes Dividends. Income Statement: Cash Accounts receivable. Inventory Fixed assets Assets Current assets Total assets The firm $230,000 168,500 $ 61,500 9,500 $ 52,000 17,500 $ 34,500 $ 13,800 Balance Sheet Liabilities and Stockholders' Equity $6,500 42,000 Accrued wages 55,000 Accrued taxes $ 103,500 90,000 Accounts payable Current liabilities Notes payable Long-term debt Common stock Retained…
Consider the following scenario: Blue Hamster Manufacturing Inc.'s income statement reports data for its first year of operation. The firm's CEO would like sales to increase by 25% next year. 1. Blue Hamster is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest and taxes (EBIT). 2. The company's operating costs (excluding depreciation and amortization) remain at 65% of net sales, and its depreciation and amortization expenses remain constant from year to year. 3. The company's tax rate remains constant at 25% of its pre-tax income or earnings before taxes (EBT). 4. In Year 2, Blue Hamster expects to pay $200,000 and $2,280,656 of preferred and common stock dividends, respectively. Complete the Year 2 income statement data for Blue Hamster, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar. Blue Hamster Manufacturing Inc. Income Statement for Year Ending December…
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Which is not an example of a well stated financial objective? Increase sales by 10% this year Reduce costs of good sold for next product launch in January 2022 Double our gross margin % by end of the year. Deliver 15% earnings growth in the 4th quarter of 2021
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Subject :- Accounting

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