kadley1
Oct 20, 2010, 05:41 PM
Question is: explain what you would have to do to project profits using the traditional format if sales were to increase 20%?
My answer: under traditional income statement, you would not be able to because certain costs, such as administrative expense, production cost, and selling costs, are buried in the cost of goods, thereby making if difficult to determine projected profits if sales were to increase by 20%.
I am not sure if this is the correct response to this question or not. My textbook is not clear, and I can't seem to find any other information that may explain this more clearly, so I am assuming that with a traditional income statement, that such projections would not be possible.
My answer: under traditional income statement, you would not be able to because certain costs, such as administrative expense, production cost, and selling costs, are buried in the cost of goods, thereby making if difficult to determine projected profits if sales were to increase by 20%.
I am not sure if this is the correct response to this question or not. My textbook is not clear, and I can't seem to find any other information that may explain this more clearly, so I am assuming that with a traditional income statement, that such projections would not be possible.