The QuickBooks Profit-Volume-Cost Forecast
The Profit-Volume Forecast worksheet shows the range of sales volume both in revenues and in units that the worksheet calculates. The lowest sales revenue volume and the highest sales revenue volume are set by your input for the low unit volume tested value and the high unit volume tested value.
The figure shows the miniature income statement at various sales volume levels. The miniature income statements in the Profit-Volume Forecast look very similar to a typical QuickBooks income statement. The following figure shows the same information presented not in dollars but in percentages of total sales.
The variable-costs portion of the miniature income statement reports on the cost of goods sold. The contribution margin is equivalent to the gross margin reported in a QuickBooks income statement. A fixed cost amount summarizes the operating expenses. The vary-with-profit costs essentially summarize income taxes and other profit-based expenses, such as a profit-sharing plan. Profits equate to the net income.
The first image shows a case in which modest changes in sales revenue can often produce huge changes in profits. Column D in the worksheet shows the profit-volume-cost forecast at the sales level equal to $315,000. Column E shows the sales revenue and cost forecast at a sales revenue level of $360,000. As the firm increases its profits by roughly 15 percent (this increase shown in cells D28 and E28), profits increase by almost 900 percent from $1,804 to $15,990 (the change from the values in cells D49 to E49).
You may not be interested in the common-size profit volume forecast shown in the second figure because this income statement shows percentages based on sales rather than dollar amounts. This figure lets you see what percentage of total sales a cost item represents. Sometimes this information is useful, and sometimes it isn’t. If you aren’t interested in the information, simply select rows 53–78 and then delete them from your workbook.