Reference no: EM132036273

Use the data below to answer the 10 questions in the "Week 2 - Formation of a P&L - Blackboard Assignment" During this month the Zyzywyx Company (ZeeCo) sold 1200 zwirfles at $35 each and 2350 widgets at $75 each.

Sales involve a simple transfer of title to the buyer at the time the goods are loaded onto trucks at their shipping dock. Historically, sales are reduced by about 2% due to quantity discounts, sales incentives, non-payment by cash buyers (bad checks, non-payment of accounts, etc) so we should "reserve" for this possibility.

(Note: there are several ways to account for such events but ZeeCo chooses to do so by adjusting sales). Zwirfles cost $12 to make; widgets cost $35 to make. The company pays $15 for the material in each widget and $20 for the labor to assemble it. ZeeCo pays $5 for the material in each zwirfle and $7 for the labor to assemble it. The company makes the products in the same month in which they are shipped.

Interest expense is $5,963. Costs associated with salaries, marketing, travel, and office expenses is $18,170 this month. Depreciation was $1,250 and taxes during this period were $4,000. Feel free to use the table below to help you gather your thoughts o for this assignment. You don't have to use it, but the intention here is to create a basic income statement from the information in the case by answering the questions below. Perhaps this table might help. If you don't want to use it, that is fine.

It is merely optional. ZeeCo Monthly Sales Data Enter data as given Accrual SALES: Revised Sales (with reserve) COGS Gross Margin Selling and Administrative Expenses Depreciation Operating Profit Interest Expenses Taxes Net Income (Profit) Questions to answer (the same questions you will encounter when you open up your Week 2 - Formation of a P&L - Blackboard Assignment to turn it in)

Question 1 - What are ZeeCo's sales for the month?

Question 2 - The case narrative says that 2% of sales are set aside ('reserved') for likely non-payment. What are revised Gross Sales after taking this into account?

Question 3 - What is the cost of product (aka COGS)? In this example we are looking for total costs associated DIRECTLY with the product (vs. indirect expenses)

Question 4 - What is the 'Gross Margin' or 'Gross Profit', that is the amount that ZeeCo has made from sales before meeting its other expenses?

Question 5 - What are the total Expenses?

Question 6 - What are the total costs? - aka all costs associated with making the product and running the business to sell it.

Question 7 - What is Net Profit (Net Income)?

Question 8 - Looking back at the income statement (aka P&L) you created, what is the operating profit? (Hint it is different thant net profit in number 7)

Question 9 - If we were to increase interest expenses, what impact would it have on EBIT (earnings before interest and taxes)? Increase, decrease, no effect, or not enough info to tell?