# Percentage Sales Method Essay Sample

7 July 2017

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â€“ Determine the year-to-year per centum one-year growing in entire net gross revenues

Year Gross saless Growth
2000 \$ 11. 062
2001 \$ 11. 933 ( 11933-11062 ) *100/11062 = 7. 87 %
2002 \$ 9. 181 ( 9181-11933 ) *100/11933 = -23. 06 %
2003 \$ 6. 141 = -33. 11 %
2004 \$ 8. 334 = 35. 71 %

â€“ Based merely on your reply to inquiry # 1. do you believe the company will hit its gross revenues end of +10 % one-year gross growing in 2005? Determine you target gross figure. and explicate why you do or make non experience that the company can hit this mark.

The mark figure would be 10 % more than \$ 8. 334 ; that is. \$ 9. 167. It seems improbable that the company will be able to accomplish its gross revenues end. The lone important big growing rate happened in 2004. while during the old 3 old ages it was either a spot smaller than 10 % ( in 2001 ) or strongly negative ( in 2002 and 2003 ) . So the tendency in gross revenues is still indicating down. In fact. if we find the mean growing rate. we find that itâ€™s been -3. 5 % since 2001. So I believe. based entirely on gross revenues informations. that the company will non be able to increment its gross revenues by 10 % in 2005.

Question 2

â€“ Use the Percentage Gross saless Method and a 20 % addition in gross revenues to forcast Applesâ€™ Consolidated Statement of Operations for the period of September 26. 2004 through Setemeber 25. 2005. Assume a 15 % revenue enhancement rate and reconstituting cost of 2 % of the new gross revenues figure

In order to reply this inquiry. we need to:

1 ) Find the gross revenues figure prognosis.
2 ) Find what per centum of the gross revenues represent the different points in the provided 2003-2004 statement.
3 ) Apply that per centum to the forecasted gross revenues in order to happen the estimated value of the other points in the statement for 2004-2005.

The first measure is easy. Since gross revenues were \$ 8. 334. so the prognosis for following twelvemonth is 20 % more than that figure ; that is. \$ 10. 000. 80.

So hereâ€™s the statement. including the per centum of gross revenues each of the points represent and how to cipher it:

Current % of gross revenues 2004/05 estimation Gross saless \$ 8. 334 â€” \$ 10. 000 Cost of Gross saless \$ 5. 458 5458*100/8334= 65. 5 % 65. 5 % of 10000 = \$ 6. 550 Gross Margin \$ 2. 876 2876*100/8334= 34. 5 % 34. 5 % of 10000 = \$ 3. 450 R & A ; D \$ 525 525*100/8334= 6. 3 % 6. 3 % of 10000 = \$ 630 S. G and A \$ 691 691*100/8334= 8. 3 % \$ 830 In proc R & A ; D â€” â€” â€” Restruct cost â€” â€” 2 % of 10000 = \$ 200 Op Expenses \$ 1. 216 â€” 630 + 830 + 200= \$ 1. 660 Op Income \$ 1. 660 â€” 3450 â€“ 1660= \$ 1. 790 Interest & amp ; other \$ 194 194*100/8334= 2. 32 % 2. 32 % of 10000= \$ 232 Inc before revenue enhancements \$ 1. 854 â€” 1790 + 232 = \$ 2. 022 Taxes ( 15 % ) \$ 278. 10 â€” 15 % of 2022 = \$ 303. 3 Net Income \$ 1. 575. 90 â€” 2022 â€“ 303. 3 = \$ 1. 718. 7

Notice that I didnâ€™t cipher the per centum of the gross revenues for many of the points. This is merely because these points are computations done with other points. so it makes no sense to utilize the per centum of gross revenues. Specifically. we have the undermentioned relationships:

Op Expenses = â€śR & A ; Dâ€ť + â€śS. G and Aâ€ť + â€śRestruct costâ€ť
Op Income = â€śGross Marginâ€ť â€“ â€śOp Expensesâ€ť
Inc before revenue enhancements = â€śOp Incomeâ€ť + â€śInterest & A ; other incomeâ€ť
Taxes = 15 % of â€śInc before taxesâ€ť
Net Income = â€śInc before taxesâ€ť â€“ â€śTaxesâ€ť

â€“ Discuss you consequences from qustion # 1. What premises have you made? Do any of your premises seem unreasonable?

The per centum gross revenues method itself can be unrealistic. In peculiar. I would anticipate costs to be higher than predicted by this method. Probably. such growing rate would necessitate spread outing the house. engaging new workers. etc. all of which would hold higher initial costs than the predicted by the per centum method. Besides. increasing the gross revenues could necessitate the gap of new markets ( selling new merchandises. or in different geographical locations. etc ) . which could temporarily hike the cost of gross revenues ( as the house makes errors because it has no experience in bring forthing the new merchandises ) . or the merchandising costs ( marketing runs need to be done in metropoliss where the merchandise is non yet known ) . etc. So I would anticipate these costs. in 2005 and for some old ages to come. to stand for a higher per centum of the gross revenues than the 1s predicted by the per centum gross revenues method.