Final answer:
To prepare the company's budgeted income statement using an absorption income statement format, calculate the total revenue, cost of goods sold, gross profit, operating expenses, and net income.
Step-by-step explanation:
To prepare the company's budgeted income statement using an absorption income statement format, we need to calculate the total revenue, cost of goods sold, gross profit, and operating expenses.
Total revenue can be calculated by multiplying the budgeted unit sales by the selling price per unit. In this case, the total revenue is $500 x $1,970 = $985,000.
The cost of goods sold can be calculated by multiplying the budgeted unit sales by the cost per unit. In this case, the cost of goods sold is $500 x $1,460 = $730,000.
Gross profit can be calculated by subtracting the cost of goods sold from the total revenue. In this case, the gross profit is $985,000 - $730,000 = $255,000.
Operating expenses include both variable and fixed selling and administrative expenses. The variable selling and administrative expenses are $50 per unit, so the total variable expenses are $50 x 500 = $25,000. The fixed selling and administrative expenses are $196,000.
To calculate the operating profit, subtract the total operating expenses from the gross profit. In this case, the operating profit is $255,000 - ($25,000 + $196,000) = $34,000.
Finally, subtract the interest expense from the operating profit to calculate the net income. In this case, the net income is $34,000 - $13,000 = $21,000.