entrepreneurial finance caculate question

In an effort to increase sales, Marvin’s Market has decided to increase it 2018 advertising expenses by 20%. According to Marvin’s projections, this will lead to a 12% increase in gross revenue, a 10% increase in returns, an 8% increase in cost of goods sold, and 10% increases in overhead expenses and inventory losses. Given these assumptions and Marvin’s 2017 profit and loss statement:

Marvin’s Market

Profit and Loss Statement

2017

Sale Activities

Gross Revenue

$550,987

Less returns

$45,098

Net Revenue

$505,889

Cost of Goods Sold

$307,888

Gross Profit

$198,001

Operating Expenses

Advertising expenses

$45,000

Overhead expenses

$102,400

Depreciation

$16,500

Total Operating Expenses

$163,900

Operating Profit

$34,101

Interest

$1,500

Inventory losses

$16,000

Profit Before Taxes

$32,601

Income Taxes

$6,846

Net Profit

$25,755

a. Prepare a projected 2018 profit and loss statement.

b. Calculate gross margin, operating margin, and net margin for 2017 and 2018.

c. Should Marvin increase his advertising budget?

You have to write on your own. No copy on any website. If necessary please add picture or excel work. If this question need.

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