Question

B&B, Inc. is preparing its master budget for the first quarter of its calendar year. The following forecasted data relate to the first quarter:

Unit sales:
January	40,000
February	55,000
March	50,000
Unit sales price	$25
Cost of goods sold per unit	$13
Expenses:
Commissions	10% of sales
Rent	$20,000/month
Advertising	15% of sales
Office salaries	$75,000/month
Depreciation	$50,000/month
Interest	15% annually on a $250,000 note payable
Tax rate	40%

Prepare a budgeted income statement for this first quarter.

Answer 1

Budgeted income statement

Particular	amount ($)	amount ($)
Sales(40000+55000+50000)×$25		3625000
(-) cost of goods sold. (145000×$13)		(1885000)
Gross profit		1740000
Operating expenses
Commission ($3625000×10%)	362500
Rent (20000×3)	60000
Advertising ($3625000×15%)	543750
Office salaries (75000×3)	225000
Depreciation ($50000×3)	150000
Interest ($250000×15%×3/12)	9375
Total operating expenses		(1350625)
Income before tax		389375
Income tax (389375×40%)		(155750)
NET income		233625

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