Acc202 Survey of Accounting: P14-15 Norman Jelen, the controller of Wing Corporation

Acc202 Survey of Accounting

P14-15 Preparing pro forma income statements with different assumptions
Norman Jelen, the controller of Wing Corporation, is trying to prepare a sales budget for the coming year. The income statements for the last four quarters follow.
1st 2nd 3rd 4th Total
Sales revenue 170,000 200,000 210,000 260,000 840,000
Cost of Goods sold 102,000 120,000 126,000 156,000 504,000
Gross Profit 68,000 80,000 84,000 104,000 336,000
Selling & Admin exp. 17,000 20,000 21,000 26,000 84,000
Net Income 51,000 60,000 63,000 78,000 252,000
Historically, cost of goods sold is about 60 percent of sales revenue. Selling and administrative expenses are about 10 percent of sales revenue.
Sam Wing, the chief executive officer, told Mr. Jelen that he expected sales next year to be 10 percent for each respective quarter above last year's level. However, Glenda Sullivan, the vice president of sales, told Mr. Jelen that she believed sales growth would be only 5 percent.
Required
a. Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Wing's estimate.
b. Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Sullivan's estimate.
c. Explain why two executive officers in the same company could have different estimates of future growth.
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