Question

Sherry and John Enterprises are using the kaizen approach to budgeting for 2018. The budgeted income statement for January 2018 is as follows:

        Sales (168,000 units)                          $1,010,000

        Less: Cost of goods sold                         690,000

        Gross margin                                            320,000

        Operating expenses                                 400,000

        (includes $55,000 of fixed costs)

        Operating income                                 -$80,000

Under the kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 1% per month.

What is the budgeted operating income for March 2018?

Question 5 options:

	$396,550
	-$59,403
	-$18,100
	$683,100

Answer 1

sales (168,000 units)	1,010,000
less: cost of goods sold (690,000*0.99*0.99)	(676,269)
gross margin	333,731
less: operating expenses (345,000 variable expenses*0.99*0.99)+55,000	(393,134)
operating income	-59,403