MasterTech is a new software company that develops and markets productivity software for municipal government applications. In developing their income statements, the following formulas are used:
gross profits= net sales – cost of sales
net operating profits=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 $900,000. Cost of sales is estimated to be $540,000. Selling expenses have a fixed component that is estimated to be $90,000 and a variable component that is estimated to be 7% of net sales. Administrative expenses are $50,000. Interest expenses are $10,000. 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.