Question

Fortune, Inc., is preparing its master budget for the first quarter. The company sells a single product at a price of $25 per unit. Sales (in units) are forecasted at 45,000 for January, 55,000 for February, and 50,000 for March. Cost of goods sold is $14 per unit. Other expense information for the first quarter follows. Comissions Rent Advertising office salaries Depreciation Interest Tax rate 8t of sales dollars $ 14,000 per month 156 of sales dollars $75,000 per month $40.000 per month 58 annually on a $250,000 note payable 308 Prepare a budgeted income statement for this first quarter. (Round your final answers to the nearest whole dollar.) FORTUNE, INC. Budgeted Income Statement For Quarter Ended March 31 Operating expenses

Answer 1

WORKING NOTES:
Total Sales = 45,000 units + 55,000 units + 50,000 units =	150,000 Units
SOLUTION:
BUDGETED INCOME STATEMENT FOR FIRST QUARTER
Sales (150,000 Units X $ 25)		$         37,50,000
Less: Cost of Goods Sold (150,000 Units X$ 14)		$         21,00,000
Gross Profit		$         16,50,000
Operating Expenses:
Commission (8% of $ 3,750,000)	$          3,00,000
Rent ($ 14,000 X $ 3 Months)	$              42,000
Advertising (15% of $ 3,750,000)	$          5,62,500
Office Salaries ($ 75,000 X 3 Months)	$          2,25,000
Depreciation ($ 40,000 X 3 Months)	$          1,20,000
Interest Expenses ($ 250,000 X 5% X 3/12)	$                3,125
		$         12,52,625
Income before taxation		$           3,97,375
Less: Taxation @ 30%		$     1,19,212.50
Net Income after Tax		$           2,78,163