Assumptions (Income Statement):
#1) Increase Advertising by: $10,000 Results in a 5.00% increase in Sales Year over Year
#2) You are considering sourcing your inventory from another supplier. Your Gross Margin Percentage is expected to change to: 57%
#3) This will result in the following: $20,000 in annual savings
#5) You purchased new equipment in the year. Dep Exp – Equipment will go up by: $500
#6) All other operating expenses are expected to remain the same total dollar amount year over year.
#7) Income Tax Expense will remain at 20% of Profit Before Taxes. Statement of Income – APPENDIX A Revenue $400,000 Cost of sales 180,000 Gross profit $220,000 Expenses Salaries $95,000 Insurance 3,000 Utilities 2,700 Property Taxes 3,600 Advertising 2,000 Depreciation – Equipment 1,000 Depreciation – Building 3,000 Miscellaneous Expenses 15,000 125,300 Profit before taxes $94,700 Income tax expense (20%) 18,940 Profit for the year $75,760
With additional advertising, you believe you can increase awareness of your store resulting in higher sales. You estimate the following: You plan on performing more of the work at the store yourself and can therefore cut down.
