Problem

Zulu, Inc., is preparing its master budget for the first quarter. The company sells a sing...

Zulu, 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 40,000 for January, 60,000 for February, and 50,000 for March. Cost of goods sold is $14 per unit. Other expense information for the first quarter follows. Prepare a budgeted income statement for this first quarter.

Commissions

10% of sales

Rent

$20,000 per month

Advertising 

15% of sales

Office salaries 

$75,000 per month

Depreciation

$50,000 per month

Interest 

15% annually on a $250,000 note payable

Tax rate

40%

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