Question

You are planning the budget for next year. Labor costs will increase by 10%. Food costs will increase by 5%. Operating costs will increase by 2%. This year, sales totaled $1,000,000. Labor costs were 40% of income, food cost was 40% of income, and operating costs were 20% of income. What is the projected budget?

a) $1,070,000
b) $1,100,000
c) $1,080,000
d) $1,050,000

Answer 1

Main Answer:

The projected budget is $1,080,000, factoring in increased labor, food, and operating costs based on this year's sales. C) $1,080,000.

Therefore, the correct answer is C) $1,080,000.

Explanation:

The projected budget is calculated by applying the specified percentage increases to the respective cost components based on this year's sales. Labor costs, which constitute 40% of income, will increase by 10%, resulting in a labor cost of 40% + 10% = 50% of the projected income. Food costs, representing another 40% of income, will increase by 5%, resulting in a food cost of 40% + 5% = 45% of the projected income. Operating costs, comprising 20% of income, will increase by 2%, resulting in an operating cost of 20% + 2% = 22% of the projected income.

To find the projected budget, you sum up these three cost components: 50% (labor) + 45% (food) + 22% (operating) = 117% of the projected income. Since this year's sales were $1,000,000, you multiply $1,000,000 by 117% (1.17) to get the projected budget of $1,170,000. However, this figure includes a 10% increase in sales, so you need to adjust for that by dividing $1,170,000 by 1.10 (1 + 10% increase), resulting in a final projected budget of $1,080,000.

Therefore, the correct answer is C) $1,080,000.

Answer 2

It accurately reflects the 10% increase in labor costs, 5% increase in food costs, and 2% increase in operating costs applied to the current year's sales, resulting in a projected budget of $1,080,000. Thus, the correct answer is option c) $1,080,000

Step-by-step explanation:

The projected budget for next year is $1,080,000. To calculate this, we start with this year's sales of $1,000,000 and apply the percentage increases to each cost category. Labor costs, which represent 40% of income, will increase by 10%, resulting in a new labor cost of $440,000 (40% of $1,100,000). Similarly, food costs, representing another 40% of income, will increase by 5%, resulting in a new food cost of $440,000 (40% of $1,100,000). Operating costs, at 20% of income, will increase by 2%, resulting in a new operating cost of $220,000 (20% of $1,100,000). Summing these costs gives us the projected budget of $1,080,000 ($440,000 + $440,000 + $220,000).

In summary, the 10% increase in labor costs, 5% increase in food costs, and 2% increase in operating costs contribute to the overall budget increase, resulting in a projected budget of $1,080,000.

Thus, the correct answer is option c) $1,080,000