Question

Smarton Company is in the process of preparing its budgeted income statement. It has determined its estimated gross margin to be $90,000. The company also expects to incur selling and administrative expenses of $30,000 and interest expense of $12,000. What is Smarton's budgeted net income

Answer 1

Smartons budgeted net income is $48000

Explanation:

We find Smartons budgeted income by subtracting the cost of sales and all underlying expenses that are part of producing goods sold from the sales/ revenue / gross margin. So in order to get this company's budgeted net income we will add all the expenses that are expected to be incurred which is $30000 + $12000 = $42000 which is the expenses expected to be incurred. Then we have expected gross margin of $90000 so the budgeted net income will be Gross margin - Expenses , $90000-$42000 = $48000.

Answer 2

$48,000

Explanation:

The budgeted net income is determined as the gross margin deducted by non-operating expenses. Assuming that the only non-operating expenses incurred are selling and administrative expenses and interest expense, Smarton's budgeted net income is:

`N = $90,000 -\$30,000-\$12,000\\N=\$48,000`

Smarton's budgeted net income is $48,000.