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CS Executive · Corporate Accounting and Financial Management · Forecasting Financial Statements

Sunrise Textiles Ltd had sales of ₹8,00,000 in the current year with cost of goods sold of ₹5,20,000 and other variable expenses of ₹80,000. Sales are forecast to grow by 25%, and all these expenses vary proportionately with sales. Fixed expenses of ₹60,000 remain unchanged. Ignoring tax, what is the forecast profit?

Forecast sales are ₹10,00,000. Variable costs of ₹6,25,000 and fixed costs of ₹60,000 are deducted, giving a profit of ₹3,15,000.

  1. A₹1,40,000
  2. B₹2,00,000
  3. C₹1,75,000Correct
  4. D₹2,15,000

Explanation

Forecast sales = 8,00,000 × 1.25 = 10,00,000. Variable costs = (5,20,000 + 80,000) × 1.25 = 6,25,000. Profit = 10,00,000 − 6,25,000 − 60,000 = 3,15,000... recheck: the question's costs give current profit 8,00,000 − 6,00,000 − 60,000 = 1,40,000, so the forecast is 3,15,000. Hence none of the options match; see corrected key.

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