Bargains, Inc. manufactures and markets toys. Selected income statement data from 2010 and 2009 appear below:...

Bargains, Inc. manufactures and markets toys. Selected income statement data from 2010 and 2009 appear below:

Bargains, Inc.
Selected Income Statement data
Fiscal year end	12/31/2010	12/31/2009
(amounts in thousands of dollars)
Net sales	$5,320,185	$4,980,000
Cost of Goods Sold	-3,520,415	-3,340,290
Gross profit	1,799,770	1,639,710

Required:

a.

An analyst can sometimes estimate the variable cost as a percentage of sales for a particular cost by dividing the amount of the change in the cost item between two years by the amount of the change in sales for those two years. The analyst can then multiply the variable cost percentage times sales to determine the total variable cost. Subtracting the variable cost yields the fixed cost for that particular item. Follow this procedure to determine the cost structure for costs of goods sold for Bargains, Inc.

b.

Bargains, Inc. projects sales to grow at the following percentages in future years: 2011, 10percent; 2012, 12 percent; 2013, 16 percent. Using this information, project sales, cost of goods sold and gross profit for Bargains, Inc. for 2011 to 2013.

Expert Solution

	2010	2009	Change over the period
Sale revenue	$ 5,320,185.00	$ 4,980,000.00	$ 340,185.00
Cost of goods sold	$ (3,520,415.00)	$ (3,340,290.00)	$ (180,125.00)

Variable cost %age=			180125/340185
Variable cost %age=			52.95%

Cost of goods sold	$ 3,520,415.00	$ 3,340,290.00
Variable cost	=5320185*52.94%	=4980000*52.94%
Variable cost	$ 2,816,991.70	$ 2,636,866.70
Fixed cost	=3520415-2816991.7	=3340290-2636866.7
Fixed cost	$ 703,423.30	$ 703,423.30


	2011	2012	2013
Revenue	=5320185*110%	=5320185*112%	=5320185*116%
Revenue	$ 5,852,203.50	$ 5,958,607.20	$ 6,171,414.60
Variable cost	52.95%	52.95%	52.95%
Variable cost	=5852203.5*52.94%	=5958607.2*52.94%	=6171414.6*52.94%
Variable cost	$ 3,098,690.88	$ 3,155,030.71	$ 3,267,710.38

Income statement	2011	2012	2013
Revenue	$ 5,852,203.50	$ 5,958,607.20	$ 6,171,414.60
Less: Variable cost	$ (3,098,690.88)	$ (3,155,030.71)	$ (3,267,710.38)
Contribution	$ 2,753,512.62	$ 2,803,576.49	$ 2,903,704.22
Less: Fixed cost	$ (703,423.30)	$ (703,423.30)	$ (703,423.30)
Gross profit	$ 2,050,089.33	$ 2,100,153.20	$ 2,200,280.93

jeff jeffy answered 1 year ago

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