Table of contents Executive summary 3 Introduction 4 Differences between projected and actual income statement 4 Consequences 4 Recommendations 5 Appendix 1 6

Executive summary

It has come to my attention that a mistake was made in our projected income statement of this month considering our breakeven point. Therefore I’m made this report to underline the importance of a good projected income statement. I’ve stated the problem analyses and the consequences of this error. Also I’ve placed my recommendations in this report.

As you can see in appendix 1, there’s a big difference in our projected income statement and our income statement based on our actual sales. The deviation of our sold products is different than stated in our projected income statement. Instead of the sales deviation of 48% Sinks, 20% Mirrors and 32% Vanities. Our actual sales deviation of this month is 32% Sinks, 40% Mirrors and 28% Vanities. Because there are differences in the contribution margins of the three products, this has lead to a lower total contribution margin than stated in the projected income statement.

Nevertheless we’ve reached our sales of $500,000 we didn’t reach our projected operating income of $36,400. Unfortunately we’ve made a operating loss of $8,600. This is due to the fact that our projected income statement was not accurate enough regarding our total contribution margin. Instead of our projected contribution margin of 52% our real total contribution margin is 43%.

I recommend that because of this difference, we also have to change our breakeven point in total sales dollars. As you can see in appendix 1, our breakeven point in total sales shouldn’t be $430,000 but instead of that it should be $520,000. The difference between the two breakeven points are a result of the different contribution margins stated in the income statement in appendix 1.