Question

Suppose a small business has sales of $15,000 this month, with future sales expected to grow by $1,600 each month. Costs consist of a fixed component, which is $7,500 per month, and a variable component, which is 40 percent of sales. Design a spreadsheet to compute the gross profit (revenue less fixed and variable costs) per month over a nine month period. What is the gross profit in a single month 7 months from now?

Answer 1

$8,220

Step-by-step explanation:

According to the scenario, computation of the given data are as follow:-

This month Sales = $15,000

Growth expect in future sales per month = $1,600

Next Month Sales = Current Month Sales + Growth Expect In Future Sales Per Month

Variable Cost = Total Sale of Current Month × 40%

Gross Profit = Sales - Fixed Cost - Variable Cost

Per Month Gross Profit

Particular Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7

Sales ($) 16,600 18,200 19,800 21,400 23,000 24,600 26,200

Less - Fixed cost($) 7,500 7,500 7,500 7,500 7,500 7,500 7,500

Less-Variable cost ($) 6,640 7,280 7,920 8,560 9,200 9,840 10,480

Gross profit ($) 2,460 3,420 4,380 5,340 6,300 7,260 8,220

Gross profit in a single 7 month from now = $8,220