Question

4. Glencoe Corp. is a small manufacturer of polymers used in specialized manufacturing applications. Glencoe’s first quarter income statement includes the following information:

Glencoe Corporation First Quarter Income Statement

Sales $1,238,400

Cost of Goods Sold $598,590

Gross Margin $639,810

Expenses Marketing expenses $211,730

Other General and Administrative Expenses $329,400 Total

Expenses $541,130 Profit (Loss) $98,680

Glencoe is planning a promotional campaign in the second quarter to increases sales (marketing expenditures will return to first quarter spending after the second quarter). This campaign will result in an increase in marketing expenses of 10%. They do not expect any sales increase until the third quarter, at which time they expect a sales increase of about 10%. Develop pro forma income statements for Glencoe for the second and third quarters reflecting the impact of this promotional campaign. Remember to include other areas of the income statement this campaign will impact

Answer 1

18 19 20 21 22 23 Glencoe Corp. Income Statement First Quarter Second Quarter 1,238,400 1,238,400 598,590 598,590 639,810 639,810 Third Quarter 1,362,240 (1238400*1.10) 658,449 (598590*5.10) 703,791 24 Sales Cost of Goods Sold Gross Margin (A) Expenses Marketing expenses Other General and Administrative Expenses Total expenses (B) Profit (Loss) (A-B) 25 26 211,730 329,400 541,130 98,680 232,903 329,400 562,303 77,507 211,730 329,400 541,130 162,661 27 28 29 30 31 32 33 In the second quarter marketing expenses has been increased by 10% i.e. (211730*1.10) and other items will not change as there is only increase in the marketing expenses in the second quarter. In the third quarter sales have been increased by 10% and due to increase in sales by 10% cost of goods will also increase by 10% but in this quarter marketing expenses have not been increased and also other general and adminstrative expenses will remain the same 34 35