Question

Fortune, 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 45,000 for January, 55,000 for February, and 50,000 for March. Cost of goods sold is $14 per unit. Other expense information for the first quarter follows.
Commissions....8% of sales
Rent....$14,000 per month
Advertising....15% of sales
Office salaries....$75,000 per month
Depreciation....$40,000 per month
Interest....15% annually on a $250,000 note payable
tax rate....30%
Prepare a budgeted income statement for this first quarter.

Answer 1

Answer:

Fortune, Inc.

Budgeted Income Statement

For the first quarter, 202x

                                   January         February        March           Total

Sales revenue           $1,125,000     $1,375,000    $1,250,000   $3,750,000

Cost of goods sold   $630,000      $770,000       $700,000     $2,100,000

Gross profit               $495,000       $605,000      $550,000     $1,650,000

S&A expenses:

• Rent                    $14,000          $14,000          $14,000        $42,000
• Office salaries    $75,000         $75,000         $75,000       $225,000
• Sales comm.      $90,000         $110,000        $100,000      $300,000
• Advertising        $168,750        $206,250       $187,500      $562,500
• Depreciation      $40,000         $40,000         $40,000       $120,000

EBIT                            $107,250        $159,750        $133,500      $400,500

Income taxes              $32,175           $47,925         $40,050       $120,150

Net income                 $75,075          $111,825         $93,450       $280,350