Question

Ferguson Corporation's budgeted sales for the upcoming quarter are $900,000. Its supporting budgets and schedules show a beginning finished goods inventory of $60,000, budgeted cost of goods manufactured of $480,000, and a projected ending finished goods inventory of $40,000. Its selling and administrative budget projects expenses of $250,000, its budgeted interest expense is $10,000, and its tax rate averages 40%. 1. The company's budgeted gross profit for the upcoming quarter is $ . 2. The company's budgeted income before taxes for the upcoming quarter is $ . 3. The company's budgeted income taxes for the upcoming quarter are $ . 4. The company's budgeted net income for the upcoming quarter is $ .

Answer 1

Answer:

1. $400,000

2. $140,000

3. $56,000

4. $84,000

Explanation:

1. Budgeted gross profit = Budgeted sales - Budgeted COG sold

where, Budgeted COG sold = $480,000 + $60,000 - $40,000 = $500,000

By putting the value, we get

Budgeted gross profit = $900,000 - $500,000

= $400,000

2. Budgeted income before taxes = Budgeted gross profit - selling and administrative expenses - interest expense

= $400,000 - $250,000 - $10,000

= $140,000

3. Budgeted income tax = Budgeted income before taxes × tax rate

= $140,000 × 40%

= $56,000

4. Budgeted net income = Budgeted income before taxes - Budgeted income tax

= $140,000 - $56,000

= $84,000