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Toys R Us Income Statement Analysis

Toys R U had a successful financial year and its CEO, S. Claus, asked for assistance in preparing the income statement for the board of directors meeting. The company sold 152,000 wooden toys for £53.50 each, and inventories rose to 37,000 units valued at 50% of sales price. Production costs included £2.1 million for materials and £15 per unit for workers. Operating expenses included £782,000 for rent, £100,000 for the CEO, £240,000 for other workers, and additional utility, insurance, and vehicle costs. The assistant is asked to work with a group to provide the full calculations for the income statement, including gross profit, overhead expenses, operating

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4 views1 page

Toys R Us Income Statement Analysis

Toys R U had a successful financial year and its CEO, S. Claus, asked for assistance in preparing the income statement for the board of directors meeting. The company sold 152,000 wooden toys for £53.50 each, and inventories rose to 37,000 units valued at 50% of sales price. Production costs included £2.1 million for materials and £15 per unit for workers. Operating expenses included £782,000 for rent, £100,000 for the CEO, £240,000 for other workers, and additional utility, insurance, and vehicle costs. The assistant is asked to work with a group to provide the full calculations for the income statement, including gross profit, overhead expenses, operating

Uploaded by

Carolyn Davies
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Exercise: Income Statement for Toys R U

S. Claus, CEO of Toys R U, was happy because they had a good financial year and was preparing
the income statement for a board of directors meeting. He has asked for you to be good and to offer
some assistance.

Toys R U sold 152,000 wooden toys at an average sales price of £53.50 while inventories rose
27,000 to 37,000 units at year end and were valued at 50% of sales price. Since workers were paid
£15/unit on a piecework basis, fixed salary costs were minimised. In conjunction, production
materials cost £2,103,250.

The rent and rates for the toy factory cost £782,000 / year while 4 admin staff are each paid annual
salaries of £25,000 in addition to £100,000 for CEO salary and £240,000 annual salary costs for toy
workers. Utility costs for electricity, lighting and heating worked out to £16,875 / quarter.

Other annual costs included £3,200 for telephone and postage and £1,500 for insurance. The
company also had a fleet of delivery vans which cost £ £12,600 for maintenance and fuel over the
past year. In conjunction, the company calculated depreciation costs for the vans of £2,100 / annum
and depreciation costs of £3,225 / annum for fixtures and fittings in the factory.

The company also has to pay 5.00% annual interest on £900,000. The corporate tax rate is 30%.

Please work in groups of 3-4 students to provide all calculations for the trading account including
cost of sales and gross profits and all calculations for net profit including overhead expenses,
operating profit and profit before tax. Calculations should be in standardised format for income
statement.

Proper calculations may earn you a Christmas bonus.

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