Compute what net profit should anthony expect to earn

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Reference no: EM13116834

Anthony Gray has been interested in music since he was old enough to sit at the piano. He literally grew up with music, and he used his talent to earn his way through college. Anthony has grown tired of his job at a large music house in Houston and is seriously considering moving back to his hometown in Massachusetts to open his own small music shop. In researching this venture, Anthony notices that he must include a projected income statement in his loan application. Use the following statistics from Robert Morris Associates' Annual Statement Studies to answer the following question(s).

Net sales 100.0 percent
Cost of sales 59.9 percent
Gross profit 40.1 percent
Operating expenses 31.2 percent
Net profit (before taxes) 8.9 percent

1. Suppose that a market survey indicates that Anthony's proposed business is likely to generate only $190,000 in sales. What net profit should Anthony expect to earn?

2. Using Anthony's target income of $23,000, construct a pro forma income statement for Anthony's proposed music shop.

Reference no: EM13116834

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