Hermann Industries is forecasting the following income statement:
Operating costs excluding depreciation
and amortization 4,400,000
Depreciation and amortization 800,000
Taxes (40%) 880,000
Net income $1,320,000
The CEO would like to see higher sales and a forecasted net income of $2,500,000.
Assume that operating costs (excluding depreciation and amortization) are 55% of sales, and depreciation and amortization and interest expenses will increase by 10%. The tax rate, which is 40%, will remain the same. What level of sales would generate $2,500,000 in net income?
This solution is in a MS Word document that contains about 250 words, which is comprised of a detailed explanation of necessary changes in income statement with a projected amount of net income. This step-by-step explanation of this complicated topic provides students with a clear perspective of how income statement is calculated.