Question

Please use the following projections for Top-A1 Inc.:

bullet•

Total sales of $ 146 comma 000$146,000

bullet•

Cost of goods sold equal to

76.376.3

percent of sales

bullet•

Total expenses equal to

13.113.1

percent of sales

bullet•

Tax rate of

3535

percent

bullet•

Beginning equity of $ 53 comma 400$53,400

bullet•

Beginning inventory of $ 12 comma 800$12,800

bullet•

Age of ending inventory of

5858

days

bullet•

Minimum cash balance of $ 10 comma 200$10,200

bullet•

Accounts receivable of

3030

days

bullet•

Fixed assets of $ 57 comma 200$57,200

bullet•

Accounts payable of

3636

days

When total sales are

$ 146 comma 000$146,000 ,

and net earnings are

$ 10 comma 059$10,059 ,

what would be the impact on Top-A1's pro-forma net earnings if sales were to change to

$ 202 comma 000$202,000 ?

Answer 1

The net earnings will increase from 10059.4 to 13917.8.

	Current	Projected
Sales	146000	202000
Less:Cost of goods sold	111398	154126
Gross profit	34602	47874
Less: Total expenses	19126	26462
Profit before tax	15476	21412
Less: Tax	5416.6	7494.2
Net Profit	10059.4	13917.8

WORKINGS