1. Business
2. Accounting
3. Financial Accounting & Bookkeeping
4. The Financial Statements
5. Income Statement
6. 261122

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Technology Team manufactures laptops that sell for $2,200 each. Assume Technology Team does not maintain an inventory; all items produced are sold during the period. Thus, all production costs appear on the income statement. The company has fixed manufacturing overhead of $4,000,000 per year. The company's fixed selling and administrative expense is $3,000,000 per year. Other expenses are as follows:

Cost per Unit

Direct materials $1,200
Direct labor 150
Variable manufacturing overhead 50
Variable selling and administrative expense 30

Management at Technology Team believe sales for 2005 will be 10,000 units.

A. Create a pro forma income statement using Exhibit 3 as a guide.
B. Discuss how a pro forma income statement helps managers make better decisions.