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1. Calculate a pro-forma income
statement for the
first year of
CCC (assume Steve
Davidson does make
and sell 30
canoes). Use a
price that you
think Steve should
charge, as well
as 2 other
prices that are
lower and higher
than that to
examine how CCCs
profit would change
based on the
price he charges.
|
Pro Forma Income Statement |
|||
|
Particulars |
Year |
Year |
Year |
|
Sales Revenue |
$84,000.00 |
$96,000.00 |
$111,000.00 |
|
COGS |
$34,830.00 |
$34,830.00 |
$34,830.00 |
|
Gross Profit |
$49,170.00 |
$61,170.00 |
$76,170.00 |
|
Marketing Expenses |
|
|
|
|
Kayak Magazine |
$1,680.00 |
$1,680.00 |
$1,680.00 |
|
Kanawa Magazine |
$340.00 |
$340.00 |
$340.00 |
|
Recreational Association |
$300.00 |
$300.00 |
$300.00 |
|
Rent Expenses |
$4,212.00 |
$4,212.00 |
$4,212.00 |
|
Operating Expenses |
$8,644.00 |
$8,644.00 |
$8,644.00 |
|
Net Income |
$33,994.00 |
$45,994.00 |
$60,994.00 |
The
above table is depicting the project6ed income Statement for First year. It is
assumed that Steve Davidson will manufacture and sell 30 canoes. It is decided
to charge $3200 from the customers because in this case the business can reach
breakeven by selling 13 units of canoes. If the price of 30 canoes increase or
decrease than it has significant impact on the profit of the business and the
units which have to be sell to achieve breakeven.
2. Also
consider what would
happen if Steve
is not able
to complete 30
canoes per year.
How does the
pro-forma income statement
change if he
is only able
to produce 20
or 25 canoes?
You can use
the price that
you think Steve
should charge. Please show your work on a separate pro-forma
income statement.
|
Particulars |
Year |
|
Sales Revenue |
$80,000.00 |
|
COGS |
$29,025.00 |
|
Gross Profit |
$50,975.00 |
|
Marketing Expenses |
|
|
Kayak Magazine |
$1,680.00 |
|
Kanawa Magazine |
$340.00 |
|
Recreational Association |
$300.00 |
|
Rent Expenses |
$4,212.00 |
|
Operating Expenses |
$8,644.00 |
|
Net Income |
$35,799.00 |
If
Davidson unable to sell 30 canoes and manage to sell 25 canoes than the
profitability of the business will decrease significantly. If Davidson sell 25
canoes on the price of $3200 than Davidson will able to generate $35799 as
profit. It is evident that when the number of canoes changes it has impact on
the profitability of the business however even after selling 25 canoes on the
suggested price the business can easily generate a significant amount of
profit.
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