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Fresno salads has a current sales of $6,000 and a profit margin of 6.5 perfect. The firm estimates that sales will increase by 4 percent next year and that all costs will vary in direct relationships to sales. What is the pro forma net income?

Respuesta :

Answer: Fresno Salads' pro forma net income is $405.60

The firm's sales is expected to grow at 4% next year.

So, its expected sales next year are [tex]6000 * 1.04 = 6240[/tex].

The question states that all costs vary directly with sales. This means that the proportion of each cost to sales remains constant, irrespective of the sales number.

This also means that the profit margin will remain the same i.e.6.5% next year.

So, the pro forma net income will be [tex]6240 * 0.065 = 405.60[/tex]



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