12) (10 points) Financial information for BDS Enterprises for the year-ended December 31, 2019, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values.
a. In the correct format, prepare the income statement using a spreadsheet and the following information on the right.
\begin{tabular}{|c|c|}
\hline Pretax income & ? \\
\hline Gross profit & \\
\hline Alocated costs (uncontrollable) & \( \$ 2.035 \) \\
\hline Labor expense & 41,580 \\
\hline Sales & 189,000 \\
\hline Research and development (uncontrollable) & 315 \\
\hline Depreciation expense & 17,000 \\
\hline Net income/(loss) & ? \\
\hline Cost of goods sold & 119.070 \\
\hline Selling expense & 1,250 \\
\hline Total expenses & ? \\
\hline Marketing costs (uncontrollable) & 790 \\
\hline Administrative expense
Income tax expense ( \( 21 \% \) of pretax income) & 690 \\
\hline Other expenses & \( 320^{?} \) \\
\hline
\end{tabular}
b. Calculate the profit margin, return on investment, and residual income. Assume an investment base of \( \$ 100,000 \) and \( 6 \% \) cost of capital on your spreadsheet.
c. Prepare a short response to accompany the income statement that explains why uncontrollable costs are included in the income statement.
