1. Start with total revenue, and subtract cost of goods sold to calculate gross
ID: 2756664 • Letter: 1
Question
1. Start with total revenue, and subtract cost of goods sold to calculate gross margin.
2. Subtract total expenses from gross margin to calculate net profit.
Your task is to create an income statement for a company that had the following results last
period.
Units Sold
100,000
Consumer promotion
$1, 800, 000
Unit Cost
$40
Personal Selling
5 sales people @ $80,000 each
Price
$90
Dealer Promotions
$1,200, 000
Advertising
$1,500,000
Product Development
$700, 000
INCOME STATEMENT
Revenue
(units sold * price)
Cost of Goods Sold
(units sold * unit cost)
Gross Margin:
(revenue- cost of goods sold)
EXPENSES
Total Expenses:
(sum
Units Sold
100,000
Consumer promotion
$1, 800, 000
Unit Cost
$40
Personal Selling
5 sales people @ $80,000 each
Price
$90
Dealer Promotions
$1,200, 000
Advertising
$1,500,000
Product Development
$700, 000
Explanation / Answer
Income Statement Amount ($) Revenue (Unit Sold*Price) 90,00,000 Cost of Goods Sold (Unit Sold*Unit Cost) 40,00,000 Gross Margin (Reevenue-Cost of Goods Sold) 50,00,000 Less: Expenses: Advertising 15,00,000 Consumer Promotion 18,00,000 Personel Selling 4,00,000 Dealer Promotion 12,00,000 Product Development 7,00,000 56,00,000 Net Profit/(Loss) (Gross Margin-Expenses) (6,00,000)
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