Design Phase Cont’d

This portion of  the Design phase will be focused on using estimated costs to develop a Profit/Loss statement (P&L statement). The BOM and prototype costing completed in Module 4A assignments will be key input into the P/L template. The determination of profitability will be completed in this phase.

A profit and loss statement (P&L), or income statement or statement of operations, is a financial report that provides a summary of a company’s revenues, expenses, and profits/losses over a given period of time. The P&L statement shows a company’s ability to generate sales, manage expenses, and create profits. It is prepared based on accounting principles that include revenue recognition, matching, and accruals, which makes it different from the cash flow statement.

Typical Structure of the Profit and Loss Statement

A company’s statement of profit and loss is portrayed over a period of time, typically a month, quarter, or fiscal year.  The main categories that can be found on the P&L include:

• Revenue (or Sales)
• Cost of Goods Sold (or Cost of Sales)
• Selling, General & Administrative (SG&A) Expenses
• Marketing and Advertising
• Technology/Research & Development
• Interest Expense
• Taxes
• Net Income