You are to prepare a projected income statement for a proposed business venture. Your desired income is $28,000 and you have the following published statistics: Costs of goods sold = 56.9 percent of net sales
Operating expenses = 37.1 percent of net sales
Gross profit margin = 43.1 percent of net sales
This information indicates the net sales on your pro forma "P & L" (income statement) would be:
A) $466,667.
B) $491,228.
C) $500,000.
D) None of the above

Question

Quizplus · Accepted Answer

To calculate the net sales required to reach a desired income of $28,000, we can use the following formula:
Net Sales - Cost of Goods Sold - Operating Expenses = Desired Income
We know that Cost of Goods Sold is 56.9% of net sales and Operating Expenses are 37.1% of net sales. Therefore, we can create the following equation:
Net Sales - 0.569 (Net Sales) - 0.371 (Net Sales) = $28,000
Simplifying and solving for Net Sales:
0.06 (Net Sales) = $28,000
Net Sales = $28,000 / 0.06
Net Sales = $466,667
Therefore, the answer is A, $466,667.

You Are to Prepare a Projected Income Statement for a Proposed