Question

Carol's Crafts & Crock Pots has heard that a budget is a really good thing!
You've been hired as their new managerial accountant, and have been called
into Carol's office to discuss it. You're shocked to see that Carol is actually
a man who is 6'-6" and a good 320#. He used to be known as "Carol the Crusher"
when played defensive end for Ohio State.
After recovering from the initial shock you start discussing the budget process with Carol.
You both decide that a forecast of three scenarios is a good starting point for
the budget planning.
Your task is to prepare three different scenarios for 2018 based on 2017 information and
the assumptions below.
Hint - you need to calculate the 2017 variable expense % to calculate variable % for
the 3 Scenarios.
Scenario #1 - Most-Likely
1. Sales increase by 15%
2. Fixed Costs remain the same.
3. Variable Costs % stay the same.
Scenario #2 - Best Case
1. Sales increase by 25%.
2. Fixed Costs for both Marketing and Operating go up 5%.
3. Variable Costs % stay the same.
Scenario #3 - Worst Case
1. Sales decrease by 5%
2. Fixed Costs remain the same.
3. Variable Costs % stay the same.
2016 information for the entire year:
Sales		$4,000,000
Cost of Goods Sold		$1,600,000
Gross Profit		$2,400,000
Marketing Expenses
Variable		$200,000
Fixed		$100,000
Total Marketing Exp.		$300,000
Operating Expenses
Variable		$320,000
Fixed		$400,000
Total Operating Exp.		$720,000
Net Income		$1,380,000

Answer 1