The following figures have been extracted from statement of comprehensive income of Rochester (Pty) LTD for...

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 .

Expert Solution

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

jeff jeffy answered 2 years ago

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