In the first year, Buon Uomo’s net sales were $500,000, operating expenses were at 42%, and the profit was 5%. Mr. Ptolemy was pleased with his venture. The second year, sales grew to $540,000, and his operating profit increased to 5.5%, with expenses totaling $226,800. He felt he was moving in the right direction. Now, his goal is to increase sales by 7% next year (which is the third year), with expenses estimated to reach 42.5% while maintaining the 5.5% operating profit. In addition, Mr. Ptolemy predicts that there will be an opening of a new mini-mall near his trading area. Therefore, as he does his projections for the fourth year, he recognizes that the increased competition could decrease the rate of sales growth to 6%, yet he wishes to maintain a 5.5% operating profit and decrease expenses to 42%. ASSIGNMENT: Using the facts and figures from the case above, prepare a spreadsheet in Microsoft Excel that shows Mr. Ptolemy’s P/L skeletons for the first two years of performance and Year 3 and Year 4 projections. In order to do that, you need to set a spreadsheet that looks like the following chart and complete all missing cells (e., the shaded cells in the chart) by entering numbers given in the above case in their corresponding cells and complete the remaining cells using formulas Year 1 Year 2 Year 3 Year 4 $ % $ % $ % $ % Net sales $500,000.00 100.00% 540,000.00 100.00% 577,800.00 100.00% 612,468.00 100.00% Cost of goods 265,000.00 Gross margin 235,000.00 Operating expenses 210,000.00 Operating profit 25,000.00

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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In the first year, Buon Uomo’s net sales were $500,000, operating expenses were at 42%, and the profit was 5%. Mr. Ptolemy was pleased with his venture. The second year, sales grew to $540,000, and his operating profit increased to 5.5%, with expenses totaling $226,800. He felt he was moving in the right direction.

Now, his goal is to increase sales by 7% next year (which is the third year), with expenses estimated to reach 42.5% while maintaining the 5.5% operating profit. In addition, Mr. Ptolemy predicts that there will be an opening of a new mini-mall near his trading area. Therefore, as he does his projections for the fourth year, he recognizes that the increased competition could decrease the rate of sales growth to 6%, yet he wishes to maintain a 5.5% operating profit and decrease expenses to 42%.

ASSIGNMENT:

Using the facts and figures from the case above, prepare a spreadsheet in Microsoft Excel that shows Mr. Ptolemy’s P/L skeletons for the first two years of performance and Year 3 and Year 4 projections. In order to do that, you need to set a spreadsheet that looks like the following chart and complete all missing cells (e., the shaded cells in the chart) by entering numbers given in the above case in their corresponding cells and complete the remaining cells using formulas

	Year 1		Year 2		Year 3		Year 4
	$	%	$	%	$	%	$	%
Net sales	$500,000.00	100.00%	540,000.00	100.00%	577,800.00	100.00%	612,468.00	100.00%
Cost of goods	265,000.00
Gross margin	235,000.00
Operating expenses	210,000.00
Operating profit	25,000.00

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