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. Prepare a budgeted income statement for this first quarter. (Round expense amounts to the nearest dollar.) Commissions . 8% of sales dollars Advertising 15% of sales dollars Interest 5% annually on a $250,000 note payable Tax rate . 30% Rent . . . . . . . . . . . . . . . . $14,000 per month Office salaries . . . . . . . . $75,000 per month Depreciation $40,000 per month
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.
Fortune, Inc., is preparing its
price of $25 per unit. Sales (in units) are
for March. Cost of goods sold is $14 per unit. Other expense information for the first quarter follows.
Prepare a
Commissions . 8% of sales dollars
Advertising 15% of sales dollars
Interest 5% annually on a $250,000 note payable
Tax rate . 30%
Rent . . . . . . . . . . . . . . . . $14,000 per month
Office salaries . . . . . . . . $75,000 per month
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