Final answer:
To determine the firm's accounting profit, subtract total expenses from sales revenue, resulting in $50,000. This figure will be modified in the pro forma statement to account for sales variation and the firm's policies on taxes and dividends, ensuring no external financing is needed.
Step-by-step explanation:
The question pertains to the creation of pro forma financial statements for a firm while considering its operational capacity, tax rate, and dividend policy without seeking additional external financing. The firm operates at 96% of its capacity and has the following costs relative to sales: $600,000 on labor, $150,000 on capital, and $200,000 on materials.
To calculate the firm's accounting profit, we start with the total sales revenue and subtract the expenses. Given the data:
- Sales revenue: $1,000,000
- Total expenses (labor + capital + materials): $600,000 + $150,000 + $200,000 = $950,000
Accounting profit is then calculated as:
Sales revenue - Total expenses = $1,000,000 - $950,000 = $50,000
As part of the pro forma statement for next year, this basic accounting profit will need to be adjusted based on the direct variation of net working capital and expenses with sales, considering the current operational capacity, set tax rate, and fixed dividend payout ratio. Since the firm wants no additional external financing, it has to ensure that the retained earnings after dividends are sufficient for any growth in sales and related expenses.