Question

Oriole, Inc. provided the following budgeted information for March through July:

	March	April	May	June	July
Projected sales	$104100	$122800	$114600	$131600	$141000
Projected merchandise purchases	$81700	$92600	$75300	$66000	$73100
Inventory at end of month	$11800	$13900	$12000	$12500	$14100

• Oriole estimates that it will collect 40% of its sales in the month of sale and 60% in the month after the sale.
• General operating expenses are budgeted to be $31100 per month of which depreciation is $2800 of this amount. Oriole pays operating expenses in the month incurred.
• The income tax rate is 40%.

How much is budgeted net income for May?

Answer 1

Budgeted net income for May = $3,780

Working

Oriole, Inc
Income Statement
For May
Sales		$    1,14,600.00
Cost Of goods sold
Finished goods Inventory, beginning	$        13,900.00
Purchases	$        75,300.00
Cost of Goods Available for sale	$        89,200.00
Less: Finished goods Inventory, Ending	$        12,000.00
Cost of Goods sold		$        77,200.00
Gross Profit		$        37,400.00
Operating Expenses		$        31,100.00
Total Operating expense		$          6,300.00
Income tax expense (40%)		$          2,520.00
Net income		$          3,780.00