Running Head – ACCOUNTING AND FORECASTING
Jerrie Smith
Week 2 IP
FINA310-1302B-04
Matt Keogh
American InterContinental University
1
2
1. Determine the year-to-year percentage annual growth in total net sales.
Solution: Year-to-Year percentage growth is calculated from sales of current year, minus sales of
previous year, divided by sales of previous year, times a 100% (Laudon, & Laudon, 2012).
Percentage growth = (Current Sales - Previous Sales)/ Previous Sales x 100 = Percentage Growth
Fiscal
Year
Net Sales
Calculation of Year-to-Year percentage growth from total sales
Percentage
Growth
2008
$ 8,334
(8334-6141)/6141*100 = 2193/6141*100 = 35.71
36%
2007
$ 6,141
(6141-9181)/9181*100 = (-3040/9181)*100 = -33.11
-33%
2006
$ 9,181
(9181-11933)/ 11933*100= (-2752/11933)*100= -23.06
-23%
2005
$ 11,933
(11933-11062)/ 11062*100= (871/11062)*100= 7.87
2004
$11,062
8%
(Segal, 2009, b)
2. Based only on your answers to question #1, do you think the company achieved its
sales goal of +10% annual revenue growth in 2009? Determine the target revenue
figure, and explain why you do or do not feel that the company hit its target.
Solution: To project the target revenue, for 2009, 2008 net sales, multiplied by 1.10 (Laudon, &
Laudon, 2012). Target revenue for 2009 = 8334*(1+ 10/100) = 9167.4
The calculated percentage of the four years of growth net sales is:
7.87 + -23.06 + -33.11 + 35.71 = -12.59/ 4
-12.59/4 = -3.1475= -3.15 % or 3.%
Although in 2004, 2005 there was revenue generated and in 2005, net sales were greater than the
target revenue of $9167, there was a percentage growth in 2008 at 36.% . That is up from a
negative growth of -33 %, and when considering the company’s past achievement of meeting the
3
predicted limit of $9,167.4 and with the current financial performance of 36% growth, it makes it
possible they could hit the target of sales of $9,167. However, because the average figures are in
at minus -3. %, sales was slightly above of the 10 % goal from 2008, and the general trend in
sales is pointing down. Therefore, Micro Chip Computer Corporation will not reach their target.
1. Consider Micro Chip's Consolidated Statement of Operations for the year ended
September 25, 2008.
Use the Percentage Sales Method and a 25% increase in sales to forecast Micro Chip's
Consolidated Statement of Operations for the period of September 26, 2008 through September
25, 2009. Assume a 15% tax rate and restructuring costs of 5% of the new sales figure.
Current
Financial
statement
Calculation formula steps
Forecast
for 2009
Sales
$8,334.00
Forecasted sales = 8,334.00 * 1.25 =
10,417.50
$10,417.50
Cost of Sales
$5,458.00
Forecasted cost of sales = 5,458.00 * 1.25 =
10,417.50
$6,822.50
Gross Margin
$2,876.00
Forecasted Gross Margin = 2,876.00* 1.25 =
3,595.
$3,595.00
Operating Expenses:
R&D
$525.00
Forecasted R & D = 525.00 * 1.25 = 630.00
$656.25
Selling, General
and
Administrative
$691.00
Forecasted Selling, General and
Administrative = 691.00* 1.25 = 863.75
$863.75
In-Process R & D
-------
------------
---------
Restructuring
Costs
-------
Forecasted Restructuring Costs = Forecasted
Sales * 2/100 = 10,417.5* 0.05 = 520.88
$520.88
4
Total Operating
Expenses
$1,216.00
Forecast for Total operating Expenses = (R &
D + Selling, General and Administrative +
Restructuring Costs) expenses of next year
$2,040.88
= 656.25+ 863.75+ 520.88= 2,040.88
Operating
Income
$1,660
Total Interest and $194.00
other Net Income
Forecasted operating income = Gross Margin
for 2009 = Total operating 2009 expenses =
3595.00- 2040.88= 1554.12
$1,554.12
Forecasted Total Interest and other Income Net $242.50
= $194.00 * 1.25 = $242.50
Income before
provision for
Income taxes
$1,854.00
Forecast for Income before taxes = (Operating
Income + Total Interest and other Income Net
) for next year = 1,554.12+$242.50= 1796.62
$1796.62
Provision for
income Taxes
(15%)
$278.10
Forecast for provision for income Taxes =
Forecast for Income before taxes * 15/100
$233.12
Net income
$1,575.90
= 1,554.12* 0.15= 233.12
Forecast for Net Income = Forecast for Income $1,321.00
before taxes - Forecast for provision for
income Taxes = 1554.12- 233.12 =1321.00
(Segal, 2009, a)
2. Discuss your results from question number #1. What assumptions have you made? Do
any of your assumptions seem unreasonable?
Using the percentage sales method, the numbers can be unrealistic and costs could be
expected to be higher than forecasted. In addition, growth rates requires expansion regarding
several factors such as hiring, marketing new products, opening new locations, costs of goods or
selling costs of new products. Therefore, the costs in 2009 could represent a higher percentage of
the sales than the predictions calculated are showing. These assumptions are not unreasonable.
5
References
Laudon, K. C., & Laudon, J.P. (2012). Pro forma balance sheet. Chapter 12.Forecasting and
Short-Term Financial Planning. Financial Management: Core Concepts. Second Edition.
ISBN:9781256694182 - CourseSmart Solutions.
Segal, S. (2009, a). Consolidated statements of operations for the period September 26, 2007
through September 25, 2008. AIU Course Material.MGMT305 - 1302B – 05
Segal, S. (2009, b). Micro chip computer selected data. AIU Course Material.MGMT305 1302B – 05
6
(Segal, 2009, b)
7
(Segal, 2009, a)