please solve with proper workanswer in text Top executive officers of Jordan 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$2,000,0001,400,000600,000240,000$360,000Cost of goods sold is usually 70 percent of sales revenue, and selling and administrative expenses are usually 10 percent of sales plusa fixed cost of $40,000. The president has announced that the company's goal is to increase net income by 15 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 15 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 $343,000. With the increased advertising, the company expects sales revenue to increase by 15percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Will thecompany reach its goal? Complete this question by entering your answers in the tabs below.Required B Required CPrepare a pro forma income statement. What percentage increase in sales would enable the company to reach itsgoal? (Round "Percentage increase" to 2 decimal places. (l.e., .2345 should be entered as 23.45).)Required AJORDAN COMPANYPro Forma Income StatementSales revenueCost of goods soldGross profitSelling & administrative expensesNet incomePercentage increase$<001%Required >Complete this question by entering your answers in the tabs below.Required ARequired BRequired CThe 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 15 percent. Calculate the required reduction in selling& administrative expenses to achieve the budgeted net income.Show lessSales revenueCost of goods soldJORDAN COMPANYPro Forma Income StatementGross proftSelling & administrative expensesNet incomeReduction in seling & administrative expensesS60Required ARequired BRequired CThe company decides to escalate its advertising campaign to boost consumer recognition, which will increase selling andadministrative expenses to $343,000. With the increased advertising, the company expects sales revenue to increase by 15percent. Assume that cost of goods sold remains a constant proportion of sales. Prepare a pro forma income statement. Withe company reach its goal?JORDAN COMPANYPro Forma Income StatementSales revenueCost of goods soldGross profitSelling & administrative expensesNet incomeWill the company reach its goal?1Required B00Show less

A proforma income statement is a financial document that outlines the estimated income and expenses…

Top executive officers of Jordan 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 $2,000,000 1,400,000 600,000 240,000 S 360,000 Cost of goods sold is usually 70 percent of sales revenue, and selling and administrative expenses are usually 10 percent of sales plus a fixed cost of $40,000. The president has announced that the company's goal is to increase net income by 15 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 15 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 $343,000. With the increased advertising, the company expects sales revenue to increase by 15 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?

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q