Mini-Case 12-5: a Projected Income Statement

question 113

Essay

Mini-Case 12-5: A Projected Income Statement
You want to start your own retail furniture store, and you have already gathered a great deal of information on location, layout, form of ownership, business failure rates, etc. In applying for a loan, you notice that a projected income statement is required. Your problem is to complete this projected "P&L," given a desired income of $23,000 and the following published statistics. Show and clearly label all of your work!
Cost of Goods Sold 60.3 percent of net sales
Operating Expenses 36.4 percent of net sales
Gross Profit Margin 39.7 percent of net sales
-If a market survey indicates that your firm's sales would be $620,000, what net profit would you expect to earn?

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Definitions:

Activity-based Costing

A method of accounting that assigns costs to specific activities based on their use of resources, providing more accurate product costing.

Factory Overhead

Indirect costs associated with manufacturing, such as maintenance, utilities, and salaries, not directly tied to production output.

Selling Prices

The cost at which a service or product is made available to purchasers.

Activity-based Costing

A strategy for attributing overhead and indirect costs to specific products and services, guided by the activities those offerings demand.