Question

The following figures have been extracted from statement of comprehensive income of Rochester (Pty) LTD for the year ended 31 December 2019 Sales R 3600 000 Cost of sale R 2160 000 Operation expenses R 864 000 Interest expenses 72 000 Company tax ( 30% of profit before tax 151 200 Net profit 352 800 Additional information 1 . The sales forecast for the year ended 31 December 2020 is 4 000 000 2. Rochester has identified cost of sales, operating expenses and interest expenses as varying in production to sales Required Prepare the pro- for a statement of comprehensive income for the year ended 31 December 2020 using the percentage of sales method .

Answer 1

To make statement of comprehensive income using percentage of sales method, first we will find out percentage of each item based on sales           
Sales is 100%          
other field % as % of sales = figure/Sales*100          
          
   Amount   % of sales  
Sales   3600000   100.00%  
cost of sales   2160000   60.00%  
Operation expenses   864000   24.00%  
interest expenses   72000   2.00%  
Profit before tax   504000   14.00%  
tax@30%   151200   4.20%  
Net profit   352800   9.80%  
          
          
Now each item will be calculated on the basis of forecasted sales          
forecasted figure = Forecasted sales*% of sales figure          
          
   % of sales   Amount  
Sales   100.00%   4000000  
cost of sales   60.00%   2400000  
Operation expenses   24.00%   960000  
interest expenses   2.00%   80000  
Profit before tax   14.00%   560000  
tax@30%   4.20%   168000  
Net profit   9.80%   392000