Question

Calgary Industries is preparing a budgeted income statement for 2018 and has accumulated the following information. Predicted sales for the year are $690,000 and cost of goods sold is 40% of sales. The expected selling expenses are $77,000 and the expected general and administrative expenses are $86,000, which includes $19,000 of depreciation. The company's income tax rate is 30%. The budgeted net income for 2018 is:__________

a) $414,000.
b) $175,700.
c) $251,000
d) $84,900.
e) $75,300.

Answer 1

b. $175,700

Step-by-step explanation:

Calgary Industries's budgeted net income for 2018 is computed as per the information above;

Sales

$690,000

Variable costs

(40% × $690,000)

($276,000)

Selling expenses

($77,000)

Administrative expenses

($86,000)

Earnings before taxes

$251,000

Income tax expense

(30% × $251,000)

($75,300)

Net income

$175,700