MasterTech is a new software company that develops and markets productivity software for municipal government applications. In developing their income statement, the following formulas are used:
gross profit = net sales – cost of sales
net operating profit = gross profit –
administrative expenses – selling expenses
net income before taxes = net operating
profit – interest expense
net income = net income before taxes – taxes
Net sales are expected to be . Cost of sales is estimated to be . Selling expenses have a fixed component that is estimated to be and a variable component that is estimated to be 8% of net sales. Administrative expenses are . Interest expenses are . The company is taxed at a 50% rate. Develop a spreadsheet model to calculate the net income. Design your spreadsheet using good spreadsheet-engineering principles.