Matthew Corporation is developing its budgets for 2024 and, for the first time, will use the kaizen approach. The initial 2024 income statement, based on static data from 2023 is as follows: Sales (200,000 units) $2,000,000 Less: Cost of goods sold 1,200,000 Gross profit 800,000 Operating expenses (includes $200,000 of depreciation) 600,000 Operating income $200,000 Selling prices for 2024 are expected to increase by 10%, and sales volume in units will decrease by 12%. The cost of goods sold as estimated by the kaizen approach will decline by 8% per unit. Other than depreciation, all other operating costs are expected to decline by 6%. Prepare a kaizen-based budgeted income statement for 2024.
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.
Matthew Corporation is developing its budgets for 2024 and, for the first time, will use the kaizen approach. The initial 2024 income statement, based on static data from 2023 is as follows:
Sales (200,000 units) $2,000,000
Less: Cost of goods sold 1,200,000
Gross profit 800,000
Operating expenses (includes $200,000 of
Operating income $200,000
Selling prices for 2024 are expected to increase by 10%, and sales volume in units will decrease by 12%. The cost of goods sold as estimated by the kaizen approach will decline by 8% per unit. Other than depreciation, all other operating costs are expected to decline by 6%.
Prepare a kaizen-based
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