Question

A proposed new investment has projected sales of 635,000. variable costs are 40 percent of sales, and fixed costs are 168,000; depreciation ice 83,000. prepare a pro forma income statement assuming a tax rate of 2.3 percent. what is the projected net income?

Answer 1

To calculate the projected net income, we need to calculate the total costs, taxable income, and apply the tax rate. The projected net income is $127,510.

Step-by-step explanation:

To prepare the pro forma income statement, we need to calculate the various components. The variable cost is 40% of sales, so it would be 0.4 * 635,000 = 254,000. The fixed costs are given as 168,000, and the depreciation is 83,000.

Next, we can calculate the total costs by adding the fixed costs and variable costs together, so it would be 168,000 + 254,000 = 422,000. To calculate the taxable income, we subtract the total costs and depreciation from the sales, so it would be 635,000 - 422,000 - 83,000 = 130,000.

Finally, we can calculate the projected net income by multiplying the taxable income by (1 - tax rate), so it would be 130,000 * (1 - 0.023) = 127,510.