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Tom’s Landscaping Company has noted sales revenues for 2016 to be $1.5 million

Posted on Posted in Accounting, ACT202 Introduction to Managerial Accounting, Case Studies

What-If Analysis with Two Variables

GIVEN:

Tom’s Landscaping Company has noted sales revenues for 2016 to be $1.5 million.
Management expects a growth rate in Sales to be 3.5% for 2017 but also expects 75%
of Sales Revenues to be Operating Expenses.

REQUIRED:

1.  What are the Projected Sales for 2017 under this growth rate scenario?

2.  What are the various Projected Operating Incomes should expected sales

growth be anywhere from 2% up to and including 8% (for every half percent)

and expenses varying from 60% to 85% (for every 5% change)?

OI Projected for 2017:
Sales for 2016  $    1,500,000
Growth for 2017 3.5%
Projected Expenses for 2017 75%
Projected Sales for 2017  $    1,552,500
Projected OI for 2017  $       388,125 60% 65% 70% 75% 80% 85%
2%  $       612,000  $       535,500  $       459,000  $       382,500  $      306,000  $         229,500
2.5%  $       615,000  $       538,125  $       461,250  $       384,375  $      307,500  $         230,625
3%  $       618,000  $       540,750  $       463,500  $       386,250  $      309,000  $         231,750
3.5%  $       621,000  $       543,375  $       465,750  $       388,125  $      310,500  $         232,875
4%  $       624,000  $       546,000  $       468,000  $       390,000  $      312,000  $         234,000
4.5%  $       627,000  $       548,625  $       470,250  $       391,875  $      313,500  $         235,125
5%  $       630,000  $       551,250  $       472,500  $       393,750  $      315,000  $         236,250
5.5%  $       633,000  $       553,875  $       474,750  $       395,625  $      316,500  $         237,375
6%  $       636,000  $       556,500  $       477,000  $       397,500  $      318,000  $         238,500
6.5%  $       639,000  $       559,125  $       479,250  $       399,375  $      319,500  $         239,625
7%  $       642,000  $       561,750  $       481,500  $       401,250  $      321,000  $         240,750
7.5%  $       645,000  $       564,375  $       483,750  $       403,125  $      322,500  $         241,875
8%  $       648,000  $       567,000  $       486,000  $       405,000  $      324,000  $         243,000

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