Mungus Coffee has recently recruited you to assist them with the financial aspect of their business. One component of your job is prepare budgets. The Income Statement for last year is presented below and you are required to create a Proforma Income Statement for July 31st 2021 using the fixed variable method. The company expects Sales to increase by 5%. Mungus Coffee Income Statement For the period July 31st 2020 Sales 126,000 Less Cost of Goods Sold 54,000 (variable) Gross Profit 72,000 Less Operating Expenses: Marketing Expense 28,400 (6000 variable and 22,400 fixed) General and Admin. Expense 8,600 (3000 variable and 5,600 fixed) Total Operting Expense 37,000 Operating Income 35,000 Less Interest Expense 1,800 (fixed) Income before taxes 33,200 Less Tax Expense (30%) 9,960 Net Income 23,240 b. Mungus Coffee is considering taking another loan to upgrade their coffee machines and management is wondering how that loan will affect the Proforma Income Statement. Indicate if there will be any changes and if so, what will be affected and ultimately, how will that change affect the net income.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Mungus Coffee has recently recruited you to assist them with the financial aspect of their business. One component of your job is prepare budgets. The Income Statement for last year is presented below and you are required to create a Proforma Income Statement for July 31st 2021 using the fixed variable method. The company expects Sales to increase by 5%.
Mungus Coffee
Income Statement
For the period July 31st 2020
Sales 126,000
Less Cost of Goods Sold 54,000 (variable)
Gross Profit 72,000
Less Operating Expenses:
Marketing Expense 28,400 (6000 variable and 22,400 fixed)
General and Admin. Expense 8,600 (3000 variable and 5,600 fixed)
Total Operting Expense 37,000
Operating Income 35,000
Less Interest Expense 1,800 (fixed)
Income before taxes 33,200
Less Tax Expense (30%) 9,960
Net Income 23,240
b. Mungus Coffee is considering taking another loan to upgrade their coffee machines and management is wondering how that loan will affect the Proforma Income Statement. Indicate if there will be any changes and if so, what will be affected and ultimately, how will that change affect the net income.
Explanations are much appreciated
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