Develop a profit-and-loss statement for the Westgate division of North Industrie
ID: 2459211 • Letter: D
Question
Develop a profit-and-loss statement for the Westgate division of North Industries.
This division manufactures light fixtures sold to consumers through home improvement
and hardware stores. Cost of goods sold represents 40 percent of net sales. Marketing
expenses include selling expenses, promotion expenses, and freight. Selling
expenses include sales salaries totaling $3 million per year and sales commissions
(5 percent of sales). The company spent $3 million on advertising last year, and freight
costs were 10 percent of sales. Other costs include $2 million for managerial salaries
and expenses for the marketing function and another $3 million for indirect overhead
allocated to the division.
a. Develop the profit-and-loss statement if net sales were $20 million last year.
b. Develop the profit-and-loss statement if net sales were $40 million last year.
c. Calculate Westgate’s break-even sales.
Explanation / Answer
answer no a
answer no b
answer no 3
Calculation of Westgate’s break-even sales if sales is $ 20 million
=11+(-2)/.45
= $ 6.56
Calculation of Westgate’s break-even sales if sales is $ 40 million
=11+7/.45
= $26.56
where contribution margin= gross margin-other variable margin
=60%-5%-10%
=45%
profit-and-loss statement for the Westgate division of North Industries. figures in $ millions amount % of sales Net Sale 20 100% Cost of goods sold 8 40% Gross margin 12 60% Markrting expenses sales expenses sales salaries 3 sales commission 5% of sales 1 promotion expenses Advertising 3 freight 10% of sales 2 9 45% General Administrative Expenses Managerial salaries and exp 2 indirect overhead 3 5 25% Net Profit or loss before tax -2
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.