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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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
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:
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