SENSITIVITY ANALYSIS IN FORECASTING FINANCIAL STATEMENTS Colossal Chemical Corporation Year Ended December 31, 2011 Year Ended December 31, 2011 ('000,000 omitted) Given the base case below, calculate the independent effects of a one percent ( 1%) increase in Gross Margin, a one percent (1%) decline in the tax rate, and a five percent (5%) increase in Sales. Sales Cost of goods sold Selling, general, and administrative expenses Depreciation Research and development Total cost and expenses Operating Income Interest expense Interest (income) Earnings before income taxes Provision for income taxes Net income Base Case Amount % to Sales $2,110 1,161 528 121 84 1,894 216 34 -5 187 64 $123.00 100% 55% 25% 6% 4% 90% 10% 2% 0% 9% 3% 6% 1% Increase in Gross Margin Amount % to Sales #DIV/0! #DIV/0! #DIV/0! #DIV/0! 0 #DIV/0! #DIV/0! #DIV/0! O #DIV/0! #DIV/0! $0 #DIV/0! 100% 54% 1% Decline in Tax Amount % to Sales 100% #DIV/0! #DIV/0! #DIV/01 #DIV/0! #DIV/0! 0 #DIV/0! #DIV/0! #DIV/0! 0#DIV/0! #DIV/0! $0 #DIV/0! 5% Increase in Sales Amount % to Sales 100 % 55% #DIV/0! #DIV/0! #DIV/0! #DIV/0! 0 #DIV/0! #DIV/0! #DIV/0! O #DIV/0! O #DIV/0! $0.00 #DIV/0!

SENSITIVITY ANALYSIS IN FORECASTING FINANCIAL STATEMENTS Colossal Chemical Corporation Year Ended December 31, 2011 Year Ended December 31, 2011 ('000,000 omitted) Given the base case below, calculate the independent effects of a one percent ( 1%) increase in Gross Margin, a one percent (1%) decline in the tax rate, and a five percent (5%) increase in Sales. Sales Cost of goods sold Selling, general, and administrative expenses Depreciation Research and development Total cost and expenses Operating Income Interest expense Interest (income) Earnings before income taxes Provision for income taxes Net income Base Case Amount % to Sales $2,110 1,161 528 121 84 1,894 216 34 -5 187 64 $123.00 100% 55% 25% 6% 4% 90% 10% 2% 0% 9% 3% 6% 1% Increase in Gross Margin Amount % to Sales #DIV/0! #DIV/0! #DIV/0! #DIV/0! 0 #DIV/0! #DIV/0! #DIV/0! O #DIV/0! #DIV/0! $0 #DIV/0! 100% 54% 1% Decline in Tax Amount % to Sales 100% #DIV/0! #DIV/0! #DIV/01 #DIV/0! #DIV/0! 0 #DIV/0! #DIV/0! #DIV/0! 0#DIV/0! #DIV/0! $0 #DIV/0! 5% Increase in Sales Amount % to Sales 100 % 55% #DIV/0! #DIV/0! #DIV/0! #DIV/0! 0 #DIV/0! #DIV/0! #DIV/0! O #DIV/0! O #DIV/0! $0.00 #DIV/0!

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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