Required informationSkip to question [The following information applies to the questions displayed below.] Baskin Promotions, Inc. sells T-shirts decorated for a variety of concert performers. The company has developed the following budget for the coming year based on a sales forecast of 90,000 T-shirts: Sales$1,584,000 Cost of Goods Sold 931,500 Gross Profit 652,500 Operating Expenses ($100,000 is fixed) 458,200 Operating Income 194,300 Income Taxes (30% of operating income) 58,290 Net Income$136,010 Cost of goods sold and variable operating expenses vary directly with sales, and the income tax rate is 30% at all levels of operating income. If the concert season is slow due to poor weather, Baskin estimates that sales could fall to as low as 70,000 T-shirts. Assume Baskin actually achieves the 70,000 unit sales level, and that net income actually earned at this level was $93,000. A performance report would indicate that net income was: Multiple Choice $2,770 over budget. $43,010 under budget. $7,110 under budget. At the budgeted level.

Over Budget means that the actual has been happened/earned more than the budgeted figure. Under…

Answered: Baskin Promotions, Inc. sells T-shirts…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Baskin Promotions, Inc. sells T-shirts decorated for a variety of concert performers. The company has developed the following budget for the coming year based on a sales forecast of 90,000 T-shirts:


Sales	$	1,584,000
Cost of Goods Sold		931,500
Gross Profit		652,500
Operating Expenses ($100,000 is fixed)		458,200
Operating Income		194,300
Income Taxes (30% of operating income)		58,290
Net Income	$	136,010

Cost of goods sold and variable operating expenses vary directly with sales, and the income tax rate is 30% at all levels of operating income.

If the concert season is slow due to poor weather, Baskin estimates that sales could fall to as low as 70,000 T-shirts.

Assume Baskin actually achieves the 70,000 unit sales level, and that net income actually earned at this level was $93,000. A performance report would indicate that net income was:

Multiple Choice

$2,770 over budget.
$43,010 under budget.
$7,110 under budget.
At the budgeted level.

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