Using the base case, calculate the composite effects of a 5 percent increase in Sales, a 2 percent decrease in Gross Margin, and a 5 percent increase is SG&A as percent of Sales. Colossal Chemical Corporation Year Ended December 31, 2021 ($000,000 omitted) Base Case Combined Sales $2,110 2215.50 Cost of goods sold 1,245 1351.46 Selling, general, and 401 531.72 administrative expense Depreciation 121 121 Research and development 108 112.99 Total costs and expenses $ 1,875 $ 1996.17 Operating Income 235 219.33 Interest expense 34 34 Earnings before Income Taxes $201 $ 185.33 Provision for Income Taxes 40 Net Income 37.07 $161 $ 148.26 For the base case in this question, as a percentage of sales, COGS=59 percent, SGA = 19 percent, R&D = 5.1 percent. Depreciation, Interest expense are fixed as stated. Tax Rate is 20 percent.

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 4RE: Refer to RE22-2. Assume Heller Company had sales revenue of 510,000 in 2019 and 650,000 in 2020....
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Using the base case, calculate the composite effects of a 5 percent increase in Sales, a 2 percent decrease in Gross Margin, and a 5
percent increase is SG&A as percent of Sales.
Colossal Chemical Corporation
Year Ended December 31, 2021
($000,000 omitted)
Base Case
Combined
Sales
$2,110
2215.50
Cost of goods sold
1,245
1351.46
Selling, general, and
401
531.72
administrative expense
Depreciation
121
121
Research and development
108
112.99
Total costs and expenses
$ 1,875 $
1996.17
Operating Income
235
219.33
Interest expense
34
34
Earnings before Income Taxes
$201 $
185.33
Provision for Income Taxes
40
Net Income
37.07
$161 $
148.26
For the base case in this question, as a percentage of sales, COGS=59 percent, SGA = 19 percent, R&D = 5.1 percent. Depreciation,
Interest expense are fixed as stated. Tax Rate is 20 percent.
Transcribed Image Text:Using the base case, calculate the composite effects of a 5 percent increase in Sales, a 2 percent decrease in Gross Margin, and a 5 percent increase is SG&A as percent of Sales. Colossal Chemical Corporation Year Ended December 31, 2021 ($000,000 omitted) Base Case Combined Sales $2,110 2215.50 Cost of goods sold 1,245 1351.46 Selling, general, and 401 531.72 administrative expense Depreciation 121 121 Research and development 108 112.99 Total costs and expenses $ 1,875 $ 1996.17 Operating Income 235 219.33 Interest expense 34 34 Earnings before Income Taxes $201 $ 185.33 Provision for Income Taxes 40 Net Income 37.07 $161 $ 148.26 For the base case in this question, as a percentage of sales, COGS=59 percent, SGA = 19 percent, R&D = 5.1 percent. Depreciation, Interest expense are fixed as stated. Tax Rate is 20 percent.
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