Question

Kling Company Budgeted Income Statement For the Quarter Ended March 31, 2018 January February March Total (20% increase per month) Net Sales Revenue 25,000 $ 30,000 S 38,000 S 91,000 Cost of Goods Sold (60% of sales) 15,000 18,000 21,600 54,800 Gross Profit 10,000 12,000 14,400 38,400 ($2,200 8% of sales) 5,080 S and A Expenses 4,200 4,800 13,880 5,800 Operating Income 7.400 9,320 22,520 Income Tax Expense (10 % of operating income) 580 740 932 2,252 5,220 $ 6,660 S 8,388 20,268 Net Income

Answer 1

Answer I. þrepare budgeted income statements for both options. assuming both options begin in January and January Sales Yemain $ 25000. : - Preparing the Budgeted income statement for option King Company Budgeted Income statement for the Quater Ended March 31,2018 January February March Total 39063 95313 31250 Sales Revenue 25000 23438 57188 18750 12500 15625 38125 16325 6025 5400 7100 Cost of goods sold L 15000 Gross profit 10000 Sand A Expenses 4900 operating Income Income Tax Expense 510 Net Income $4590 5100 9600 21800 960 2180 710 $19620 $6390 $8640

- Prepare the budgeted Income statement for option 2 : King Company Budgeted Income statement for the Quater Ended March 31,2018 Maren Total February January 95313 25000 16250 31250 20313 39063 25391 10937 13672 61454 33359 14225 8750 4200 5325 4900 Sales Revenue Cost of goods sold Gross profit S and A Expenses operating Income Income Tax Expense Net Income 6237 8347 19134 4550 624 835 455 1914 $ 5613 7512 $17220 $ 4095 2. Which obtion should king. Choose ? If any of the two options is chosen, it would be option-1 because net income for the quater is expected to be higher under this option. However, both options are expected to yield Tower] met income for the quater than the $ 20268 Currently budgeted, king may decide to remain with Current Budget .