Percentage of Sales Method
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For selected financial statements for Micro Chip Computer Corporation(see attached file #1) . Answer questions 1 and 2 below based on the financial data.
1.)Determine the year-to-year percentage annual growth in total net sales.
2.)Based only on your answers to question #1, do you think the company will hit its sales goal of +10% annual revenue growth in 2005? Determine the target revenue figure, and explain why you do or do not feel that the company can hit this target.
Next, consider Micro Chip's Consolidated Statement of Operations for the year ended September 25, 2004 (see attached file #2 for chart information) and answer questions 1 and 2.
1.)Use the Percentage Sales Method and a 20% increase in sales to forecast Micro Chip's Consolidated Statement of Operations for the period September 26, 2004 through September 25, 2005. Assume a 15% tax rate and restructuring costs of 2% of the new sales figure.
2.)Discuss your results from question number #1. What assumptions have you made? Do any of your assumptions seem unreasonable?
To receive full credit on this assignment, please show all work, including formulae and calculations used to arrive at financial values. Students who are using Excel must provide an adequate explanation of the methodology used to arrive at that answer.
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Solution Summary
The solution explains the use of percentage of sales method to prepare a forecasted income statement for Microchip
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1. Determine the year-to-year percentage annual growth in total net sales.
The year-to-year percentage is calculated by the following formula (Year2-Year1)/Year1 and the figure as a percentage. The calculation are in the attached file.
2. Based only on your answers to question #1, do you think the company will hit its sales goal of +10% annual revenue growth in 2005? Determine the target revenue figure, and explain why you do or do not feel that the company can hit this target.
The sales in 2004 are 8,334. Based on a 10% growth rate, the 2005 sales come to 9,167. In order to decide if the company will meet the ...
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