Question 3 (25 marks) – Financial Planning

Itacho Sushi Restaurant Holding is one of the leading Japanese restaurant groups in Singapore.

By referring to the Group’s Consolidated Profit & Loss Statement for the year ended 30 June 2022 given on Page 8, prepare a Pro Forma Consolidated Profit & Loss Statement for the Year Ended 30 June 2023 with the following assumptions:

• • Revenue increases by FG% from 2022 where FG are the 6^th and 7^th digit of the group leader’s administration number.

For example:

• If group leader’s admin. number is 2134567A, revenue increases by 67%.
• If the group leader’s admin. number is 2132008J, revenue increases by 8%.
• If the 6^th and 7^th digits of the group leader’s admin number are both 0 (e.g. 2134500J), revenue increases by 18%.

• Cost of sales and other operating expenses are variable costs and vary proportionately

with revenue.

• Selling & distribution (S&D) expenses consist of fixed and variable costs. $AB,CDE,000 of the total S&D expenses reported for the year ended 30 June 2022 are fixed costs and the remaining are variable costs where ABCDE are the 1st to 5th digits of the group leader’s admin. number.
  

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For example:
o If group leader’s admin. number is 2134567A, the fixed costs for S&D are $21,345,000.

• General & administrative (G&A) expenses consist of fixed and variable costs. Of the total G&A expenses reported for the year ended 30 June 2022, $4,800,000 are fixed costs and the remaining are variable costs.
• 2023 Tax rate remains the same as in 2022.
• All other income items and expense items are unchanged (in $ amount) for 2023.

Required:

Use the template provided on Page 9 to prepare the Pro Forma Profit & Loss Statement for the year ended 30 June 2023. Reference the workings on the third column in this template using small letters (a, b, c ….).

Show all workings clearly in the space provided on page 9 and the indicate the reference letters based on what you have indicated on the third column provided on Page 8.

For calculation of variable cost %, use up to 1 decimal place (for example: 4.5%)

b. Calculate the % change in the net profit from 30 June 2022 to 30 June

Explain the reason(s) for the difference in the % change in the revenue and the % change in the net profit from 2022 and 2023. Is the difference always favourable?