D. #2. Trophy Company prepared the follwing budgeted income statement for the first quarter of 2019: January $30,000 $13,500 $16,500 $5,200 $11,300 $2,825 $8,475 February $34,500 $15,525 $18,975 $5,605 $13,370 $3,343 $10,028 March $39,675 $17,854 $21,821 $6,071 $15,751 $3,938 $11,813 Sales Revenue (15% increase per month) Cost of Goods Sold (45% of Sales) Gross Profit Selling & Admin Expenses ($2,500+9% of Sales) Operating Income (Before Taxes) Income Tax Expense (25% of Operating Income) Net Income Trophy Company is considering two options. Option 1 is to increase advertising by $800 per month. Option 2 seeks better production materials which will increase Cost of Goods Sold to 48% of Sales. Management projects each of these will increase sales by 22% per month rather than 15%. Required: 1. Prepare Budgeted Income Statements for both Options, assuming both options begin in January. January sales will remain at $30,000. 2. Which option should Trophy Company choose? Explain your answer.

D. #2. Trophy Company prepared the follwing budgeted income statement for the first quarter of 2019: January $30,000 $13,500 $16,500 $5,200 $11,300 $2,825 $8,475 February $34,500 $15,525 $18,975 $5,605 $13,370 $3,343 $10,028 March $39,675 $17,854 $21,821 $6,071 $15,751 $3,938 $11,813 Sales Revenue (15% increase per month) Cost of Goods Sold (45% of Sales) Gross Profit Selling & Admin Expenses ($2,500+9% of Sales) Operating Income (Before Taxes) Income Tax Expense (25% of Operating Income) Net Income Trophy Company is considering two options. Option 1 is to increase advertising by $800 per month. Option 2 seeks better production materials which will increase Cost of Goods Sold to 48% of Sales. Management projects each of these will increase sales by 22% per month rather than 15%. Required: 1. Prepare Budgeted Income Statements for both Options, assuming both options begin in January. January sales will remain at $30,000. 2. Which option should Trophy Company choose? Explain your answer.

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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Concept explainers

Master Budget

A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.

Sales Budget and Selling

A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.

Question

1. Prepare budgeted income statements for both Options, assuming both options begin in January. January sales will remain at $30,000. 2. Which option should trophy co.pany choose? Explain

A
B
D
G
H
K
#2. Trophy Company prepared the follwing budgeted income statement for the first quarter of 2019:
January
$30,000
$13,500
$16,500
$5,200
$11,300
$2,825
$8,475
February
$34,500
$15,525
$18,975
$5,605
$13,370
$3,343
$10,028
March
$39,675
$17,854
$21,821
$6,071
$15,751
$3,938
$11,813
Sales Revenue (15% increase per month)
Cost of Goods Sold (45% of Sales)
Gross Profit
Selling & Admin Expenses ($2,500+9% of Sales)
Operating Income (Before Taxes)
Income Tax Expense (25% of Operating Income)
Net Income
Trophy Company is considering two options. Option 1 is to increase advertising by $800 per month. Option 2 seeks better production
materials which will increase Cost of Goods Sold to 48% of Sales. Management projects each of these will increase sales by 22% per month rather than 15%.
Required:
1. Prepare Budgeted Income Statements for both Options, assuming both options begin in January. January sales will remain at $30,000.
2. Which option should Trophy Company choose? Explain your answer.

Definition Definition Basic financial report that forecasts estimated profits, revenue, and expenses for the company in the coming year or months. Budgeted income statements are helpful for companies in planning for the future, making better decisions, and allocating available resources more effectively and efficiently.

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