Business Administration - Management FIS403 Lecture Notes - Lecture 4: Cash Flow, Retained Earnings, Gross Profit

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30 May 2018

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Problem

Quality Engines Inc had sales of 7,000 units in March and expects a

50% increase for April. The company will maintain 5% of expected

unit sales in April as ending inventory. Beginning inventory for April

is 200 units.

How many units should the company produce in April?

April Production

Expected Unit Sales 10,500

(7,000*1.5)

Desired Ending Inventory + 525

(10,500*0.05)

Beginning Inventory - 200

Required Production 10,825

Pro Forma Income Statement

June 30, 2013

Sales revenue . . . . . . 100,000 Table

4-1

Cost of goods sold . . . . . 61,470 Table

4-6

Gross profit . . . . . . . 38,530

Selling, general and administrative expense 12,000 -

given

Operating profit (EBIT) . . . . 26,530

Interest expense . . . . . . 1,500

- given

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