Question

Fresno Salads has current sales of $6,000 and a profit margin of 6.5 percent. The firm estimates that sales will increase bu 4 percent next year and that costs will vary in direct relationship to sales. What is the pro forma net income?

A. 303.33
B. 327.18
C. 405.60
D. 438.70
E. 441.10

Answer 1

Answer:

Option "C" is the correct answer to the following statement.

Explanation:

Given:

Current Sales = $6,000

Profit margin = 6.5%

Estimated increase in sales = 4%

Computation of future sale:  

New Sales = $6,000 + 4% of $6,000

= $6,000 + $240

New Sales = $6,240

Pro forma net income = Profit margin x New sale

= 6.5% x $6,240

= 405.60

Pro forma net income is estimated or forecast income for the next year.