For the base case in this section, as a percentage of sales, the following figures are given:- Cost of Goods Sold (COGS) = 69 percent- Selling, General and Administrative Expenses (SGA) = 15 percent- Research and Development (R&D) = 2.5 percentDepreciation and interest expenses are fixed as stated. The tax rate is 21 percent. **Title: Financial Analysis of Colossal Chemical Corporation****Objective:**To analyze the independent effects of a 2% increase in Gross Margin, a 2% decrease in the Tax Rate, and a 5% decrease in Sales for Colossal Chemical Corporation based on the base case data provided.---**Colossal Chemical Corporation** **Year Ended December 31, 2021** (*$000,000 omitted*)| **Account** | **Base Case** | **2% Increase in Gross Margin** | **2% Decrease in Tax Rate** | **5% Decrease in Sales** ||----------------------------------------------|---------------|---------------------------------|----------------------------|---------------------------|| **Sales** | $2,110 | | | || **Cost of Goods Sold** | $1,456 | | | || **Selling, General, and Administrative Expense** | $317 | | | || **Depreciation** | $160 | | | || **Research and Development** | $53 | | | || **Total Costs and Expenses** | $1,986 | | | || **Operating Income** | $124 | | | || **Interest Expense** | $39 | | | || **Earnings Before Income Taxes** | $85 | | | || **Provision for Income Taxes** | $18 | | | || **Net Income** | $67 | | | |---**Instructions:**- **Base Case**: This column provides the financial figures without any adjustments applied.- **2% Increase in Gross Margin**: Adjust for an increase in gross margin and calculate the resulting financial figures.- **2% Decrease in Tax Rate**: Adjust the provision for income taxes to reflect a 2% lower tax rate and assess its impact.- **5% Decrease in Sales**: Calculate the effect of a 5% decrease in sales on all relevant financial figures.---**Purpose:**This table helps visualize how changes in specific financial assumptions impact the income statement of Colossal Chemical Corporation. Use this information to understand sensitivity to variations in gross margin, tax rates, and sales volume.**Note:

Under vertical analysis, each line of financial statements is presented as a percentage of a base…

Using the same case, calculate the independent effects of a 2 percent increase in Gross Margin, a 2 percent decrease in the Tax Rate, and a 5 percent decrease in Sales. Sales Cost of goods sold Selling, general, and administrative expense Depreciation Research and development Total costs and expenses Operating Income Interest expense Earnings before Income Taxes Provision for Income Taxes Net Income Base Case 2% Increase in Gross Margin $2,110 $ 1,456 317 160 53 $ 1,986 $ 124 39 $85 $ 18 Colossal Chemical Corporation Year Ended December 31, 2021 ($000,000 omitted) $67 $ $ $ $ 2% Decrease in Tax Rate $ $ $ $ 5% Decrease in Sales

Using the same case, calculate the independent effects of a 2 percent increase in Gross Margin, a 2 percent decrease in the Tax Rate, and a 5 percent decrease in Sales. Sales Cost of goods sold Selling, general, and administrative expense Depreciation Research and development Total costs and expenses Operating Income Interest expense Earnings before Income Taxes Provision for Income Taxes Net Income Base Case 2% Increase in Gross Margin $2,110 $ 1,456 317 160 53 $ 1,986 $ 124 39 $85 $ 18 Colossal Chemical Corporation Year Ended December 31, 2021 ($000,000 omitted) $67 $ $ $ $ 2% Decrease in Tax Rate $ $ $ $ 5% Decrease in Sales

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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