Pro forma income statement

Thanks for guidance with this assignment...

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This set of questions relates to the case overleaf, "ACME Office Systems" and deals with income statements in a marketing context. There are 2 questions. For each question, please show calculations clearly and state upfront any assumptions you are making. It is ok to copy and paste the worksheets as long as the calculations are shown clearly.

ACME OFFICE SYSTEMS

ACME Office Systems is in the business of marketing office systems to corporations as well as households. The marketing plan of Angela Lee, the product manager responsible for the Home Office Systems Group, forecasts next year's sales revenues to be $25 million. Discussions with the sales director indicate that 40% of the company's sales force will be dedicated to selling products of Home Office Systems Group. Sales reps will receive a 15% commission on sales of home office systems. Under the new organizational structure, the Home Office Systems Groups will be charged with 40% of the budgeted sales force expenditure. The sales director's budget for both the Corporate and Home Office Systems groups is $7.5 million.

The advertising and promotional budget contains 3 elements: a) trade magazine advertising, b) cooperative newspaper advertising with ACME dealers, and c) sales promotional material including product brochures, technical manuals, catalogs, and point-of-purchase displays. Production and media placement costs are budgeted at $300,000. Cooperative advertising production costs are budgeted at $100,000. The company allocates 5% of company sales to dealers to promote its office systems. Dealers always use the complete cooperative advertising allowances.

Operations personnel indicate that the direct costs of material and labor and direct factory overhead to produce the Home Office System line represents 50% of sales. The accounting department will assign $600,000 in indirect manufacturing overhead (e.g., depreciation, maintenance, etc.) to the product line and $300,000 for administrative overhead (clerical, telephone, office space, and so forth). Freight for the product line will average 8% of sales.
Lee's staff consists of two product executives and a marketing assistant. Salaries and fringe benefits for Ms. Lee and her staff are $250,000 per year.
 
1. Prepare a pro forma income statement for the Home Office Systems group given the information provided. For your ease, the main entries are provided in the box on the next page. Use the space below to show your computation for each entry in the box clearly. If these computations are not shown, your score will be lower.

PRO FORMA

Sales

Cost of Goods Sold
________________________________________________________________________
Marketing Expenses

1.

2.

3.
[If there are more than 3, please add below.]

________________________________________________________________________
General & Administrative Expenses

1.

2.

3.

________________________________________________________________________
Net Profit Before (Income) Tax

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2. At what level of dollar sales will the Home Office Systems group break even? Support your answer clearly and systematically showing all computations.