Hello, do I inculde cost of goods (70% of sales) in operating income? why is it...

Hello,

do I inculde cost of goods (70% of sales) in operating income? why is it not included in tables of budget? how do I make operating income table

Thank you

http://www.chegg.com/homework-help/spreadsheets-sensitivity-analysis-income-statementstudy-appe-chapter-7-problem-41p-solution-9780136102656-exc

Expert Solution

Cost of good sold will be included in operating income
Sales - cogs = gross profit less operating expenses = operating income
It should be included in table of budget

SPEEDY-MART STORE, NORTHCENTER MALL
Spreadsheet for Profit Planning, Parts 1 & 2
Table of Budget Data
	June	July	August
Sales forecasts	$375,000.00	$330,000.00	$420,000.00
Sales increase (decrease)	0.00%	0.00%	0.00%
	$375,000.00	$330,000.00	$420,000.00
Cost of goods sold percentage			$0.70
Misc. expense percentage			$0.06
Sales commissions			$0.10
Employee salaries per month			$22,000.00
Rent per month			$6,000.00
Insurance expense per month			$450.00
Depreciation per month			$2,850.00

Disbursements for Operating Expenses (2a)
Cost of goods sold	$262,500.00	$231,000.00	$294,000.00	$787,500.00
Commissions	$37,500.00	$33,000.00	$42,000.00	$112,500.00
Salaries	$22,000.00	$22,000.00	$22,000.00	$66,000.00
Miscellaneous	$22,500.00	$19,800.00	$25,200.00	$67,500.00
Rent	$6,000.00	$6,000.00	$6,000.00	$18,000.00
Total	$350,500.00	$311,800.00	$389,200.00	$1,051,500.00

Operating Income (2b)
	June	July	August	Total
Sales	$375,000.00	$330,000.00	$420,000.00	$1,125,000.00
Cost of goods sold	$262,500.00	$231,000.00	$294,000.00	$787,500.00
Gross margin	$112,500.00	$99,000.00	$126,000.00	$337,500.00
Operating expenses
Commissions	$37,500.00	$33,000.00	$42,000.00	$112,500.00
Salaries	$22,000.00	$22,000.00	$22,000.00	$66,000.00
Miscellaneous	$22,500.00	$19,800.00	$25,200.00	$67,500.00
Rent	$6,000.00	$6,000.00	$6,000.00	$18,000.00
Insurance	$450.00	$450.00	$450.00	$1,350.00
Depreciation	$2,850.00	$2,850.00	$2,850.00	$8,550.00
Total	$91,300.00	$84,100.00	$98,500.00	$273,900.00
Operating income	$21,200.00	$14,900.00	$27,500.00	$63,600.00

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