Complete the following exercise. Fill in the Excel spreadsheet provided via the link below to provide your answers to parts a and b. Then paste the Excel data into a Word document on which you can also write the answer to part c.
Income Statement
Administrative Expenses $ 70,000
Finished Goods Inventory January 1, 20X3 $120,000
Cost of Goods Manufactured during the year $200,000
Finished Goods Inventory December 31, 20X3 $ 60,000
Selling Expenses $ 40,000
Sales $680,000
Required:
Using the information for Superior Manufacturing Company, prepare the income statement for the year ended December 31, 20X3. (Assume a 30% income tax.)
Provide at least three performance ratios regarding Superior Manufacturing Company, and comment on the company's performance.
Create a report between 200 and 300 words in length for leadership. The topic is the state of this company. Where do you see a problem regarding the company? Make some suggestions if there are areas you feel need to be further investigated.
To complete this exercise, follow the steps below:
Step 1: Open the Excel spreadsheet provided via the link given to you.
Step 2: Input the provided information into the relevant cells in the Excel sheet. Fill in the income statement items based on the given values:
- Administrative Expenses: $70,000
- Finished Goods Inventory January 1, 20X3: $120,000
- Cost of Goods Manufactured during the year: $200,000
- Finished Goods Inventory December 31, 20X3: $60,000
- Selling Expenses: $40,000
- Sales: $680,000
Step 3: Calculate the Gross Profit by subtracting the Cost of Goods Sold from the Sales. In this case, the Cost of Goods Sold will be calculated as follows:
Cost of Goods Sold = Opening Finished Goods Inventory + Cost of Goods Manufactured - Closing Finished Goods Inventory
Substitute the relevant values from the information given to calculate the Cost of Goods Sold.
Step 4: Calculate the Operating Income by subtracting the Administrative Expenses and Selling Expenses from the Gross Profit.
Step 5: Calculate the Net Income by applying the given income tax rate of 30% to the Operating Income.
Net Income = Operating Income * (1 - Tax Rate)
Step 6: Copy the completed income statement from the Excel sheet and paste it into a Word document.
To provide at least three performance ratios for Superior Manufacturing Company, you can use financial ratios such as:
1. Gross Profit Margin: Gross Profit / Sales
This ratio measures the company's ability to generate profit from its production process.
2. Operating Profit Margin: Operating Income / Sales
This ratio indicates the efficiency of the company's operations in generating profits.
3. Return on Assets (ROA): Net Income / Total Assets
ROA measures how effectively a company utilizes its assets to generate profit.
Comment on the company's performance based on these ratios by comparing them to industry benchmarks or previous years' performance.
To create a report on the state of the company, consider the following steps:
Step 1: Start with an introduction and provide a brief overview of Superior Manufacturing Company's financial performance.
Step 2: Analyze the income statement and performance ratios to identify any areas of concern or potential problems.
Step 3: Discuss each area of concern in detail, explaining why it is a problem and its potential impact on the company's overall performance.
Step 4: Provide suggestions or recommendations for improvement in the identified problem areas. These suggestions could include further investigation into specific areas, implementing cost-saving measures, improving efficiency, or exploring new growth opportunities.
Step 5: Summarize the report, emphasizing the key findings and recommendations.
Ensure that your report is between 200 and 300 words in length and organized in a clear and concise manner.