(Projected income statement) Last year’s income statement for Marano Company is presented below:
|
Sales (50,000 $10) |
$500,000 |
|
|
Cost of goods sold: |
||
|
Direct material |
$200,000 |
|
|
Direct labor |
100,000 |
|
|
Overhead |
50,000 |
(350,000) |
|
Gross profit |
$150,000 |
|
|
Expenses |
||
|
Selling |
$ 50,000 |
|
|
Administrative |
40,000 |
(90,000) |
|
Income before taxes |
$ 60,000 |
|
Sales are expected to decrease by 10 percent, and material and labor costs are expected to increase by 10 percent. Overhead is applied to production based on a percentage of direct labor costs. Ten thousand dollars of selling expenses are considered fixed. The balance varies with sales dollars. All administrative costs are fixed. Management desires to earn 5 percent on sales this year and will adjust the unit selling price, if necessary. Develop a pro forma income statement for the year for Marano Company that incorporates the indicated changes.