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Akshay Kumar answered on Oct 02 2021
1
Income Statement
Last Year %
Sales $4,000,000.00
Variable Expenses
Cost of Goods Sold $2,500,000.00 62.50%
Operating Expense $900,000.00 22.50%
Total Variable Expenses $3,400,000.00 85.00%
Income Statement in Next Year
a b c d
Sales $4,000,000.00 $4,500,000.00 $5,000,000.00 $6,000,000.00
Less: Variable Expenses
Cost of Goods Sold $2,500,000.00 $2,812,500.00 $3,125,000.00 $3,750,000.00
Operating Expense $900,000.00 $1,012,500.00 $1,125,000.00 $1,350,000.00
Total Variable Expenses $3,400,000.00 $3,825,000.00 $4,250,000.00 $5,100,000.00
Less: Fixed Operating Expenses $300,000.00 $300,000.00 $300,000.00 $300,000.00
Less: Interest $90,000.00 $90,000.00 $90,000.00 $90,000.00
Profit Before Tax $210,000.00 $285,000.00 $360,000.00 $510,000.00
Less: Tax (21%) $44,100.00 $59,850.00 $75,600.00 $107,100.00
Net Income $165,900.00 $225,150.00 $284,400.00 $402,900.00
2
Income Statement
Last Year %
Sales $2,000,000.00
Variable Expenses
Cost of Goods Sold $800,000.00 40.00%
Operating Expense $600,000.00 30.00%
Total Variable Expenses $1,400,000.00 70.00%
Income Statement in Next Year
a b c d
Sales $2,000,000.00 $2,400,000.00 $2,800,000.00 $3,200,000.00
Less: Variable Expenses
Cost of Goods Sold $800,000.00 $960,000.00 $1,120,000.00 $1,280,000.00
Operating Expense $600,000.00 $720,000.00 $840,000.00 $960,000.00
Total Variable Expenses $1,400,000.00 $1,680,000.00 $1,960,000.00 $2,240,000.00
Less: Fixed Operating Expenses $130,000.00 $130,000.00 $130,000.00 $130,000.00
Less: Interest $75,000.00 $75,000.00 $75,000.00 $75,000.00
Profit Before Tax $395,000.00 $515,000.00 $635,000.00 $755,000.00
Less: Tax (21%) $82,950.00 $108,150.00 $133,350.00 $158,550.00
Net Income $312,050.00 $406,850.00 $501,650.00 $596,450.00
3
Last Year Data
Particulars Amount % of Sales
Sales $4,500,000.00
Account Receivables $450,000.00 10.00%
Inventory $200,000.00 4.44%
Account Payables $300,000.00 6.67%
Forecasted Balance
Sales Level
Accounts $4,000,000.00 $4,500,000.00 $5,000,000.00 $6,000,000.00
Account Receivables $400,000.00 $450,000.00 $500,000.00 $600,000.00
Inventory $177,777.78 $200,000.00 $222,222.22 $266,666.67
Account Payables $266,666.67 $300,000.00 $333,333.33 $400,000.00
4
Last Year Data
Particulars Amount Sales Time of Account Payables
Sales $1,500,000.00
Account Payables $75,000.00 20.00
Forecasted Balance
Account Payables $65,000.00 $75,000.00 $90,000.00 $120,000.00
Sales $1,300,000.00 $1,500,000.00 $1,800,000.00 $2,400,000.00
5
Collection Period 45 Assumed 360 Days in Year
Sales Level $200,000.00 $400,000.00 $800,000.00 $1,600,000.00
Account Receivable $25,000.00 $50,000.00 $100,000.00 $200,000.00
(Formula = Collection Period * Sales /360)
6
Account Receivable Turnover Ratio 12
Account Receivable $100,000.00 $250,000.00 $500,000.00 $1,000,000.00
Sales $1,200,000.00 $3,000,000.00 $6,000,000.00 $12,000,000.00
Formula = Account Receivable Turnover Ratio * Account Receivable
7
% of Sales
Sales $3,500,000.00
Cash $140,000.00 4.00%
Marketable Sec. $100,000.00 2.86%
a b c d
Sales Level $4,000,000.00 $4,000,000.00 $4,000,000.00 $4,000,000.00
Cash Balance $160,000.00 $160,000.00 $160,000.00 $160,000.00
Marketable Sec.
Spontaneous 100% 70% 30% 0%
Discretionary 0% 30% 70% 100%
Marketable Sec. - Spontaneous $114,285.71 $80,000.00 $34,285.71 $0.00
Marketable Sec. - Discretionary $0.00 $30,000.00 $70,000.00 $100,000.00
Total Marketable Sec. Balance $114,285.71 $110,000.00 $104,285.71 $100,000.00
8
% of Sales
Sales $10,000,000.00
Cash $250,000.00 2.50%
Marketable Sec. $175,000.00 1.75%
a b c d
Sales Level $12,000,000.00 $12,000,000.00 $12,000,000.00 $12,000,000.00
Cash Balance $300,000.00 $300,000.00 $300,000.00 $300,000.00
Marketable Sec.
Spontaneous 100% 60% 25% 0%
Discretionary 0% 40% 75% 100%
Marketable Sec. - Spontaneous $210,000.00 $126,000.00 $52,500.00 $0.00
Marketable Sec. - Discretionary $0.00 $70,000.00 $131,250.00 $175,000.00
Total Marketable Sec. Balance $210,000.00 $196,000.00 $183,750.00 $175,000.00
9
Sales $16,000,000.00
Plant & Equipment $5,000,000.00 31.25%
a
Sales Level $20,000,000.00
Plant & Equipment 31.25%
Plant & Equipment ending balance $6,250,000.00
b
We are at capacity but only can add 750,000 increments. We need $6,250,000 minus 5,000,000 or 1,250,000 of added equipment. Since we can only purchase 750,000 increments, we need to purchase $1.5 million of equipment instead of $1,250,000. As a result, our equipment is $6.5 million
c
We have $5,000,000 of equipment, and at 90% capacity.
90% capacity means we are using $4,500,000 of equipment 4,500,000/16,000,000=28.125% of revenue. If sales go to 20,000,000, we will need 28.125% times 20,000,000=5,625,000
d
we need to buy 750,000 as we cannot buy only 625,000. As a result,
equipment is $5,750,000 instead of $5,626,000
10
Sales $30,000,000.00
Plant & Equipment $12,000,000.00 40.00%
a
Sales Level $40,000,000.00 $4,000,000.00
Plant & Equipment 40.00% 2,500,000.00
Plant & Equipment ending...