Top executive officers of Preston Company, a merchandising firm, are preparing t

Question

Top executive officers of Preston Company, a merchandising firm, are preparing the next year's budget. The controller has provided everyone with the current year's projected income statement Current Year $1,900,000 1,330,000 Sales revenue Cost of goods sold Gross profit Selling & admin, expenses Net income 570,000 267,000 $ 303,000 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 $77,000. The president has announced that the company's goal is to increase net income by 20 percent. Required The following items are independent of each other a-1. Prepare a pro forma income statement PRESTON COMPANY Pro Forma Income Statement Sales revenue Cost of goods sold Gross profit Selling & administrative expenses 1,900,000 1,330,000 570,000 $303,000 a 2. What percentage increase in sales would enable the company to reach its goal? (Round your answer to 2 decimal places.) 1-1%] I ncrease in sales

Explanation / Answer

Workings:

a1 Sales Revenue $        2,203,000 Cost of Goods Sold $        1,542,100 Gross Profit $            660,900 Selling and administrative expenses $            297,300 Net Income(303000*1.20) $            363,600

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