Question

Answer the following questions using the information below:

Violet Sales Corp reports the year-end information from 2016 as follows:

Sales (35,000 units) $280,000
Cost of goods sold 105,000
Gross margin 175,000
Operating expenses 150,000
Operating income $ 25,000

Violet is developing the 2016 budget. In 2016 the company would like to increase selling prices by 3.5%, and as a result expects a decrease in sales volume of 15%. All other operating expenses are expected to remain constant. Assume that cost of goods sold is a variable cost and that operating expenses are a fixed cost.

*9) What is budgeted sales for 2016?*
A) $291,200
B) $246,330
C) $302,400
D) $322,000
Objective 6.4

Answer 1

The budgeted sales for Violet Sales Corp for the year 2016 are $246,330, after adjusting for a 3.5% increase in the selling price and a 15% decrease in sales volume.

Step-by-step explanation:

The question asks to calculate the budgeted sales for Violet Sales Corp for the year 2016, taking into consideration a 3.5% increase in the selling price and an expected 15% decrease in sales volume. The original sales were $280,000 from selling 35,000 units. To find the budgeted sales, we need to adjust the original sales figure by the increased selling price and the changed sales volume.

First, we calculate the new selling price per unit: New Selling Price per Unit = Original Price per Unit * (1 + Percentage Increase) So, New Selling Price per Unit = ($280,000 / 35,000 units) * (1 + 0.035) = $8 * 1.035 = $8.28 per unit

Next, we calculate the budgeted volume of sales after the expected decrease: Budgeted Volume of Sales = Original Volume of Sales * (1 - Percentage Decrease) So, Budgeted Volume of Sales = 35,000 units * (1 - 0.15) = 35,000 units * 0.85 = 29,750 units

Now, we can calculate the budgeted sales revenue: Budgeted Sales Revenue = New Selling Price per Unit * Budgeted Volume of Sales So, Budgeted Sales Revenue = $8.28 per unit * 29,750 units = $246,330

Therefore, the correct budgeted sales for 2016 is option B) $246,330.