acc 400
70,000 units 80,000 units 90,000 units
Sales $1,400,000 $1,600,000 $1,800,000
Cost of goods sold 840,000 960,000 1,080,000
Gross profit on sales $560,000 $640,000 $720,000
Operating expenses ($90,000 fixed) 370,000 410,000 450,000
Operating income $190,000 $230,000 $270,000
Income taxes (30% of operating income) 57,000 69,000 81,000
Net income $133,000 $161,000 $189,000
Assume that the cost of goods sold and variable operating expenses vary directly with sales and the income taxes remain at 30 percent of operating income.
Calculations for 90,000 units:
Sales:
Take the sales from previous budget and divide by number of units: 1,600,000/80,000= 20
Then multiply 90,000 *20= 1,800,000
Cost of goods sold:
Take cost of goods sold from previous units then divide by number of units: 960,000 / 80,000= 12 cost per unit: 12
90,000 * 12= 1,080,000
Gross profit on sales:
Subtract sales from cost of goods sold: 1,800,000 – 1,080,000= 720,000
Operating expense (90,000 fixed):
Take the previous units operating expense and subtract from the 90,000 fixed: 410,000-90,000= 320,000
Take 320,000 divide by number of units 80,000= 4
Multiply 4 by 90,000 units= 360,000
Take 360,000 + 90,000= 450,000
Operating income:
Subtract gross profit on sales from operating expense: 720,000- 450,000= 270,000
Income Taxes (30% of operating income):
Take operating income times .30: 270,000*.30= 81,000
Net income:
Subtract operating income from income taxes: 270,000-81,000= 189,000
balance of the business that will be sold in an equity financing depends on how much the owner has invested in the business and what a particular investment is worth at the moment of the financing. For instance, an entrepreneur that spend $600,000 in the startup of the company will initially control every one of the shares of the company. Just As a company expands and needs additional capital, the entrepreneur may search for an external investor, such as an angel investor or a
Sales $1,400,000 $1,600,000 $1,800,000
Cost of goods sold 840,000 960,000 1,080,000
Gross profit on sales $560,000 $640,000 $720,000
Operating expenses ($90,000 fixed) 370,000 410,000 450,000
Operating income $190,000 $230,000 $270,000
Income taxes (30% of operating income) 57,000 69,000 81,000
Net income $133,000 $161,000 $189,000
Assume that the cost of goods sold and variable operating expenses vary directly with sales and the income taxes remain at 30 percent of operating income.
Calculations for 90,000 units:
Sales:
Take the sales from previous budget and divide by number of units: 1,600,000/80,000= 20
Then multiply 90,000 *20= 1,800,000
Cost of goods sold:
Take cost of goods sold from previous units then divide by number of units: 960,000 / 80,000= 12 cost per unit: 12
90,000 * 12= 1,080,000
Gross profit on sales:
Subtract sales from cost of goods sold: 1,800,000 – 1,080,000= 720,000
Operating expense (90,000 fixed):
Take the previous units operating expense and subtract from the 90,000 fixed: 410,000-90,000= 320,000
Take 320,000 divide by number of units 80,000= 4
Multiply 4 by 90,000 units= 360,000
Take 360,000 + 90,000= 450,000
Operating income:
Subtract gross profit on sales from operating expense: 720,000- 450,000= 270,000
Income Taxes (30% of operating income):
Take operating income times .30: 270,000*.30= 81,000
Net income:
Subtract operating income from income taxes: 270,000-81,000= 189,000
balance of the business that will be sold in an equity financing depends on how much the owner has invested in the business and what a particular investment is worth at the moment of the financing. For instance, an entrepreneur that spend $600,000 in the startup of the company will initially control every one of the shares of the company. Just As a company expands and needs additional capital, the entrepreneur may search for an external investor, such as an angel investor or a