Question

Information from the operating budgets of Roswell Fabricators follows: Selling and administrative expenses $ 140,000 Factory overhead 200,000 Sales 1,000,000 Cost of goods sold 450,000 Capital expenditures 100,000 If Northwest's income tax rate is 30%, what is the budgeted net income?

Answer 1

Budgeted net income=$77,000

Step-by-step explanation:

Budgeted net income=Total income/Earnings-Deductions/expenditure-income tax

where;

Expenditures;

Selling and administrative expenses=140,000

Factory overheads=200,000

Cost of goods sold=450,000

Capital expenditures=100,000

Total expenditure=Selling and administrative expenses+factory overheads+cost of goods sold+capital expenditures

replacing;

Total expenditure=(140,000+200,000+450,000+100,000)=$ 890,000

Earnings;

Total income/earnings=1,000,000

Income tax=30%of net income

net income=Total income-expenditure=(1,000,000-890,000)=110,000

Income tax=(30/100)×110,000=33,000

Replacing in the expression;

Budgeted net income=Total income/Earnings-Deductions/expenditure-income tax

Budgeted net income=1,000,000-890,000-33,000=77,000

Budgeted net income=$77,000