Review the Profit and Loss Statement below and answer the following questions
1) What impact does Cost of Goods Sold have on Total Income?
2) If quality improved such that returns were reduced by 50%, what impact would that have on Net Income?
3) If alternative office rental accommodations could be found at a savings of $5,000 what would be the impact on Net Income?
| Income | ||
|
|
|
|
| Gross Sales
|
$323,789.40
|
|
| Less Returns and Allowances |
$10,000.00
|
|
| Net Sales |
|
$313,789.40
|
|
|
|
|
| Cost of Goods |
|
|
| Merchandise |
|
|
| inventory, January 1 |
$160,000.00
|
|
| Purchases |
$90,000.00
|
|
| Freight Charges |
$2,000.00
|
|
| Total Merchandise Handled |
$252,000.00
|
|
|
|
|
|
| Less Inventory, December 31 |
-$100,000.00
|
|
| Cost of Goods Sold |
|
$152,000.00
|
| Gross Profit |
|
$161,789.40
|
|
|
|
|
| Interest Income |
$2,500.00
|
|
| Total Income |
|
$164,289.40
|
|
|
|
|
| Expenses |
|
|
| Salaries |
$50,360.40
|
|
| Utilities |
$5,800.00
|
|
| Rent |
$23,000.00
|
|
| Office Supplies |
$2,250.00
|
|
| Insurance |
$3,900.00
|
|
| Advertising |
$8,650.00
|
|
| Telephone |
$2,700.00
|
|
| Travel and Entertainment |
S$2,550.00
|
|
| Dues and Subscriptions |
$1,100.00
|
|
| Interest Paid |
$2,100.00
|
|
| Repairs and Maintenance |
$1,250.00
|
|
| Taxes and Licenses |
$35,589.00
|
|
| Total Expenses |
|
$139,289.40
|
|
|
|
|
| Net Income |
|
$25,000.00
|
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