Baker's Dozen has current sales of $1,400 and a proﬁt margin of 7 percent. The ﬁrm estimates that sales will increase by 8% next year and that all costs will vary in direct relationship to sales. What is
The pro forma net income?

Question

Quizplus · Accepted Answer

The current net income is $1,400 * 7% = $98. With an 8% increase in sales, the new sales will be $1,400 * 1.08 = $1,512. The pro forma net income will be $1,512 * 7% = $105.84.

Baker's Dozen Has Current Sales of $1,400 and a Proﬁt