(1) Take note that a large part of the 2010 purchases remains on hand, which amounts to $62,537 while the projected sales for 2011 are targeted at $53,637.
(2) This should raise the owner's awareness about making a clear study on which goods are selling poorly, moderately, or rapidly.
(3) In addition, the entrepreneur should be on the lookout for the latest products but test their viability first, before fully stocking-up on them.
(4) In the event that poor-selling products will still remain unsold, the owner should sell them at a discounted price before the year ends.
(5) The estimate for future stock purchases should be limited by the equivalent cost of goods sold for the 2011 projected sales.
(6) In determining the estimated cost of goods sold, calculate the purchase cost by dividing projected sales at 120%, assuming that the mark up on prices is at 20%. For this purpose we arrived at the amount of $44,698, based on this computation: [$53,637/1.20 or (120%/100%)]
(7) Hence some of the funds for purchases should come from selling the slow-moving goods, and provide only a minimal amount of additional purchases for 2011. However, in actual practice, one can always go beyond the projected amount if the demand for the new product has a good turnover rate.
(8) Remember, these are only guesses but the accounting principle of conservatism should be observed – thus, we project $5,000 only for additional purchases. This may increase but will depend on the viability of the items.
(9) Post $5,000 to cell J19
Please continue on page 2 for more on working with the Excel Pro Forma Income Statement