Question

Vaughn Company has completed all of its operating budgets. The sales budget for the year shows 46,000 units and total sales of $2,070,000. The total cost of making one unit of sales is $26. It estimates selling and administrative expenses to be $278,000 and income taxes to be $178,800. Prepare a budgeted income statement for the year ending December 31, 2022.

Answer 1

A budgeted income statement for Vaughn Company is prepared by computing revenue per unit, cost of goods sold, gross margin, deducting selling and administrative expenses, and accounting for income taxes to arrive at a net income of $417,200 for the year.

Step-by-step explanation:

To prepare a budgeted income statement for Vaughn Company, we start by computing the gross margin. With 46,000 units sold at a total sales value of $2,070,000, the revenue per unit is $45 ($2,070,000 ÷ 46,000). The cost of goods sold is calculated by multiplying the cost to make one unit ($26) by the total number of units (46,000), which equals $1,196,000. Subtracting the cost of goods sold from total sales gives us a gross margin of $874,000 ($2,070,000 - $1,196,000). Next, we account for operating expenses. Deducting this from the operating income provides us with the net income, equal to $417,200 ($596,000 - $178,800). The final step is to construct the budgeted income statement for the year ending December 31, 2022, which would appear as follows:

• Sales: $2,070,000
• Cost of Goods Sold: $1,196,000
• Gross Margin: $874,000
• Selling and Administrative Expenses: $278,000
• Operating Income: $596,000
• Income Taxes: $178,800
• Net Income: $417,200