Question

Ferguson Corporation's budgeted sales for the upcoming quarter are $900,000. Its supporting budgets and schedules show a beginning finished goods inventory of $60,000, budgeted cost of goods manufactured of $480,000, and a projected ending finished goods inventory of $40,000. Its selling and administrative budget projects expenses of $250,000, its budgeted interest expense is $10,000, and its tax rate averages 40%. 1. The company's budgeted gross profit for the upcoming quarter is $ . 2. The company's budgeted income before taxes for the upcoming quarter is $ . 3. The company's budgeted income taxes for the upcoming quarter are $ . 4. The company's budgeted net income for the upcoming quarter is $ .

Answer 1

Ferguson Corporation's budgeted financial figures indicate a gross profit of $400,000, an income before taxes of $140,000, income taxes of $56,000, and a net income of $84,000 based on the given data.

Step-by-step explanation:

To calculate the budgeted financial figures for Ferguson Corporation, we start with budgeted gross profit. This is calculated as budgeted sales minus cost of goods sold (COGS). The COGS is calculated as the beginning finished goods inventory plus the budgeted cost of goods manufactured minus the ending finished goods inventory. Following this, we determine the budgeted income before taxes by subtracting total expenses, including selling and administrative expenses as well as interest expense, from the gross profit. To find the budgeted income taxes, we apply the tax rate to the budgeted income before taxes. Lastly, budgeted net income is the income before taxes minus the calculated income taxes.

Here is the step-by-step calculation:

1. Budgeted Gross Profit: $900,000 (Budgeted sales) - [$60,000 (Beginning inventory) + $480,000 (Budgeted cost of goods manufactured) - $40,000 (Ending inventory)] = $900,000 - $500,000 = $400,000
2. Budgeted Income Before Taxes: $400,000 (Gross Profit) - $250,000 (Selling and Administrative Expenses) - $10,000 (Interest Expense) = $400,000 - $260,000 = $140,000
3. Budgeted Income Taxes: $140,000 (Income Before Taxes) × 40% (Tax Rate) = $56,000
4. Budgeted Net Income: $140,000 (Income Before Taxes) - $56,000 (Income Taxes) = $84,000

Answer 2

1. $400,000

2. $140,000

3. $56,000

4. $84,000

Step-by-step explanation:

1. Budgeted gross profit = Budgeted sales - Budgeted COG sold

where, Budgeted COG sold = $480,000 + $60,000 - $40,000 = $500,000

By putting the value, we get

Budgeted gross profit = $900,000 - $500,000

= $400,000

2. Budgeted income before taxes = Budgeted gross profit - selling and administrative expenses - interest expense

= $400,000 - $250,000 - $10,000

= $140,000

3. Budgeted income tax = Budgeted income before taxes × tax rate

= $140,000 × 40%

= $56,000

4. Budgeted net income = Budgeted income before taxes - Budgeted income tax

= $140,000 - $56,000

= $84,000