Question

ABC Company, an outdoor furniture manufacturer, has decided to introduce a new, lightweight lawn chair to the market in the Spring of 2019. This product is new to ABC because for the last 50 years the company has focused on selling picnic tables wholesale. This product will be sold directly to retail stores by a newly formed sales force. As part of the New Product Team you will need to conduct some initial business analysis. Your team is putting together a pro-forma income statement. Use the below data to create an income statement for the first quarter of 2019. Marketing has projected that is will cost $85,000 a quarter to support a sales force. The initial up front cost will be $150,000 to create this new sales department (these monies will be secured with a $1,000,000 loan that ABC will get at 3.5% interest or $8,750 a quarter). Marketing also has projected that advertising will cost approximately $8,000/qtr. Salaries for the new sales force and the additional factory workers $240,000/qtr. Sales people earn 35 cents per chair as a commission/bonus. The retail price of the new product has been determined to be $40, $38, or $35. ABC will sell the chairs wholesale direct to retailers for $22, $20, or $17 respectively. The price will be determined once a business analysis has been conducted. ABCs COGS is 40% of wholesale-no matter what the final price. Review the below income statement and answer the questions below. Sales COGS E Gross Profit Marketing Advertising -Salaries - Commissions Total Expenses t.2 .3/ NHT Earnings Before Interest and Taxes - -Interest - Earnings before taxes - -Taxes (1896)- Net Income-
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