A proposed new investment has projected sales of $550,000. Variable costs are 40 percent of sales, and fixed costs are $130,500; depreciation is $50,750. Prepare a pro forma income statement assuming a tax rate of 23 percent. What is the projected net income?

A proposed new investment has projected sales of $550,000. Variable costs are 40 percent of sales, and fixed costs are $130,500; depreciation is $50,750. Prepare a pro forma income statement assuming a tax rate of 23 percent. What is the projected net income?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter3: Cost Behavior And Cost Forecasting

Section: Chapter Questions

Problem 8DQ: Describe the cost formula for a strictly fixed cost such as depreciation of 15,000 per year.

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Question

A proposed new investment has projected sales of $550,000. Variable costs are 40 percent of sales, and fixed
costs are $130,500; depreciation is $50,750. Prepare a pro forma income statement assuming a tax rate of 23
percent. What is the projected net income?
Answer
Sales
Variable costs
Fixed costs
Depreciation
EBT
Taxes
Net income

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