Question

Calgary Industries is preparing a budgeted income statement for 2018 and has accumulated the following information. Predicted sales for the year are $695,000 and cost of goods sold is 40% of sales. The expected selling expenses are $77,500 and the expected general and administrative expenses are $86,500, which includes $19,500 of depreciation. The company's income tax rate is 30%. The budgeted net income for 2018 is:

Answer 1

Answer:

Calgary Industries

Budgeted Net Income for 2018:

Sales Revenue                                     $695,000

Cost of goods sold                               $278,000

Gross profit                                            $417,000

Selling expenses                                    $77,500

General and Administrative expenses $67,000

Depreciation                                           $19,500

Budgeted Pre-tax Income                  $253,000

Income tax rate (30%)                             75,900

Budgeted Net Income                          $177,100

Explanation:

a) Data and Calculations:

Estimates:

Sales = $695,000

Cost of goods sold = 40% of sales = $695,000 * 40% = $278,000

Selling expenses = $77,500

General and Administrative expenses = $86,500 - $19,500 = $67,000

Depreciation = $19,500

Income tax rate = 30%

b) Calgary Industries' budgeted net income of $177,100 is the result of deducting the operating expenses and income tax from the gross profit.  The gross profit of $417,000 is obtained by deducting the cost of goods sold from the Sales Revenue.  These profit points explain the economic returns created by the Calgary Industries.  They reflect its financial performance during the budgeted period.