Question

Fortune, Inc., is preparing its master budget for the first quarter. The company sells a single product at a price of $25 per unit. Sales (in units) are forecasted at 45,000 for January, 55,000 for February, and 50,000 for March. Cost of goods sold is $14 per unit. Other expense information for the first quarter follows.

Commissions....8% of sales
Rent....$14,000 per month
Advertising....15% of sales
Office salaries....$75,000 per month
Depreciation....$40,000 per month
Interest....15% annually on a $250,000 note payable
tax rate....30%
Prepare a budgeted income statement for this first quarter.

Answer 1

Fortune, Inc.

Budgeted Income Statement

For the first quarter, 202x

January February March Total

Sales revenue $1,125,000 $1,375,000 $1,250,000 $3,750,000

Cost of goods sold $630,000 $770,000 $700,000 $2,100,000

Gross profit $495,000 $605,000 $550,000 $1,650,000

S&A expenses:

• Rent $14,000 $14,000 $14,000 $42,000
• Office salaries $75,000 $75,000 $75,000 $225,000
• Sales comm. $90,000 $110,000 $100,000 $300,000
• Advertising $168,750 $206,250 $187,500 $562,500
• Depreciation $40,000 $40,000 $40,000 $120,000

EBIT $107,250 $159,750 $133,500 $400,500

Income taxes $32,175 $47,925 $40,050 $120,150

Net income $75,075 $111,825 $93,450 $280,350