Reference no: EM131060553
Bells manufacturing estimates that the sales for the 2016 financial year will be $2.25 million. No new borrowing was obtained and, therefore, the interest expense remained unchanged at $24,500. Bells Manufacturing is planning on paying cash dividends of $85,000 during 2016. Refer to the financial data in the table while answering the following
a. Compile the pro forma income statement for the year ended December 31, 2016, using the percentage of sales method.
b. Compile the pro forma income statement for the year ended December 31, 2016, using the fixed and variable cost data
c. As the financial manager, which of the two pro forma statements would you regard as more accurate, explain.
Bell Manufacturing
Income Statement for the Year
Ended December 31, 2015
Sales Revenue $1,800,000
Less Cost of Goods sold $1,100,000
Gross Profits $700,000
Less: Operating Expenses $450,000
Operating Profits $250,000
Less: Interest Expense $24,500
Net Profits before taxes $225,500
Less: Taxes (rate = 40%) $90,200
Net Profit after taxes $135,300
Less: Cash Dividends $85,000
To retained earnings $50,300
Bell Manufacturing Breakdown
Of Cost and Expenses into Fixed
And Variable Components for the
Year Ended December 31, 2015
Cost of goods sold
Fixed cost $750,000
Variable cost $350,000
Total Costs $1,100,000
Operating Expenses
Fixed expenses $155,000
Variable expenses $295,000
Total Expense $450,000
|
Theories of interest rate determination
: You are a financial analyst for the CMC Corporation. This corporation predicts changes in the economy, such as interest rates, retail trends, and unemployment. Your job is to educate incoming analyst on the terminology, definitions, and uses of in..
|
|
What was the standard deviation-arithmetic average
: You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 12 percent, –12 percent, 19 percent, 24 percent, and 10 percent. a. What was the arithmetic average return on Crash-n-Burn’s stock over this five-year pe..
|
|
Describing concepts of information systems delivery
: Write a 3 page paper (excluding title, abstract, introduction, and references) describing the concepts of the Information Systems Delivery Cycle (SDLC) and how the Project Management Life Cycle can be effectively leveraged to deliver IT projects m..
|
|
What is bom and present its different forms
: What is "BOM" and present its different forms.
|
|
Compile the pro forma income statement for the year
: Bells manufacturing estimates that the sales for the 2016 financial year will be $2.25 million. No new borrowing was obtained and, therefore, the interest expense remained unchanged at $24,500. Compile the pro forma income statement for the year ende..
|
|
Determine which alternative is less costly
: A granary has two options for a conveyor used in the manufacture of grain for transporting, filling, or emptying. One conveyor can be purchased and installed for $80,000 with $1,500 salvage value after 16 years. Determine which alternative is less co..
|
|
Case study in international management
: *Case study in International Management 1. What the new manager or family expects in the new assignment? 2. What problems you and your family experienced in first year of movement?
|
|
Annuity and retirement
: Annuity/Retirement A. If you deposited the following amount per month (letters in your last name X $80) from your paycheck from the time you graduate from school until you retire (at age 75) and your employer contributed an extra 6%, how much wealth ..
|
|
What is the present value of the interest tax shields
: The unlevered firm expects to earn $250,000 in net operating income each year for the foreseeable future. It has a tax rate of 40% and has a capitalization rate of 8% equal to the industry required return for this type of firm. What is the present va..
|