Exercise 23.10
Exercise 23.10
70,000 80,000 90,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,400,000 $1,600,000 $1,800,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . . .$840,000 $ 960,000 $1,080,000
Gross profit on sales . . . . . . . . . . . . . . . . . . . $560,000 $ 640,000 $ 720,000
Operating expenses ($90,000 fixed) . . . . . . . $370,000 $ 410,000 $ 450,000
Operating income . . . . . . . . . . . . . . . . . . . . . .$190,000 $ 230,000 $ 270,000
Income taxes (30% of operating income) . . . .$ 57,000 $ 69,000 $ 81,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .$133,000 $ 161,000 $ 189,000
Exercise 23.12
William George is the marketing manager at the Crunchy Cookie Company. Each quarter, he is responsible for submitting a sales forecast to be used in the formulation of the company’s master budget. George consistently understates the sales forecast because, as he puts it, “I am reprimanded if actual sales are less than I’ve projected, and I look like a hero if actual sales exceed my projections.”
a. What would you do if you were the marketing manager at the Crunchy Cookie Company? Would you also understate sales projections? Defend your answer.
As a sales manager at the Crunchy Cookie Company, I would not understate the sales projections. I believe that it is not beneficial to the company or the employees in the long-run. By not understating the sales projection it allows the company to come up with new creative ideas to exceed realistic sales projections.
b. What measures might be taken by the company to discourage the manipulation of sales forecasts? One measure the company can take to discourage the manipulation of sales forcast would be for management to
70,000 80,000 90,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,400,000 $1,600,000 $1,800,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . . .$840,000 $ 960,000 $1,080,000
Gross profit on sales . . . . . . . . . . . . . . . . . . . $560,000 $ 640,000 $ 720,000
Operating expenses ($90,000 fixed) . . . . . . . $370,000 $ 410,000 $ 450,000
Operating income . . . . . . . . . . . . . . . . . . . . . .$190,000 $ 230,000 $ 270,000
Income taxes (30% of operating income) . . . .$ 57,000 $ 69,000 $ 81,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .$133,000 $ 161,000 $ 189,000
Exercise 23.12
William George is the marketing manager at the Crunchy Cookie Company. Each quarter, he is responsible for submitting a sales forecast to be used in the formulation of the company’s master budget. George consistently understates the sales forecast because, as he puts it, “I am reprimanded if actual sales are less than I’ve projected, and I look like a hero if actual sales exceed my projections.”
a. What would you do if you were the marketing manager at the Crunchy Cookie Company? Would you also understate sales projections? Defend your answer.
As a sales manager at the Crunchy Cookie Company, I would not understate the sales projections. I believe that it is not beneficial to the company or the employees in the long-run. By not understating the sales projection it allows the company to come up with new creative ideas to exceed realistic sales projections.
b. What measures might be taken by the company to discourage the manipulation of sales forecasts? One measure the company can take to discourage the manipulation of sales forcast would be for management to