Pro-Forma Income Statement Silver Company has asked you to prepare a pro-formain

Question

Pro-Forma Income Statement

Silver Company has asked you to prepare a pro-formaincome statement for the coming

year. Thefollowing information is available:

Expected sales revenue . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . $1,240,000

Manufacturing costs:

Variable cost of goods sold . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . 625,000

Fixed overhead . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 125,000

Selling expenses:

Variable expenses . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 140,000

Fixed expenses . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 45,000

Administrativeexpenses:

Variable expenses . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 45,000

Fixed expenses . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 160,000

Other:

Interest expense . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 28,000

Explanation / Answer

Contribution is nothing but Sales minusVariable Costs Hence , your proforma should go something likethis Expected Sales Revenue 1,240,000.00 Less : Variable Cost of Goods Sold 625,000.00 Variable Selling Expenses 140,000.00 Variable Administrative Expenses 45,000.00 (810,000.00) Contribution 430,000.00 Less Fixed Expenses Fixed Overhead 125,000.00 Fixed Selling Expenses 45,000.00 Fixed Administrative Expenses 160,000.00 Fixed Interest Expense 28,000.00 (358,000.00) NetIncome 72,000.00 Less : Taxes (25,200.00) Net Incomeafter Taxes 46,800.00

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