(SOLVED) Last year Emily Sanford had a booth at the three day


Question Description:

$19

Last year, Emily Sanford had a booth at the three-day Indianapolis Craft Expo, where she sold a variety of silver jewelry handcrafted in India. Her before-tax profit was as follows:
Sales……………………………………………….. $21,000
Less:
Cost of jewelry sold……………………………… 11,550
Gross margin………………………………………. 9,450
Less other expenses:
Registration fee………………………………….. 1,800
Booth rental (6% sales)…………………………… 1,260
Salary of Mindy Orwell…………………………… 450
Before tax profit…………………………………. $ 5,940
Mindy Orwell is a friend who takes care of the booth for approximately five hours, from 9 A.M. until 2 P.M. Emily takes over from 2 P.M. until closing at 9 P.M. Emily has added several new designs to her collection and anticipates that in the coming year, her sales will increase by 20 percent, to $25,200. In light of this, she has forecasted before-tax profit as follows:
Required
a. What is the fundamental assumption that Emily is making, and why is it obviously wrong?
b. Prepare a more appropriate forecast of before-tax profit related to the Indianapolis Craft Expo.

Answer

$19