party-time t-shirts sells t-shirts for parties at the local college. the company completed the first year of operations, and the shareholders are generally please with the operating results from the income statement: net sales revenue $350,000 cost of goods sold 210,000 gross profit 140,000 operating expenses: selling expense 40,000 administrative expens 25,000 net income $75,000 bill hildebrand, the controller, is considering how to expand the business. he proposes two ways to increas profits to $100,000 during 2018. a. hildebrand believes he should advertise more heavily. he believes additional advertising costing $20,000 will increase net sales by 30% and leave administrative expense unchanged. assume cost of goods sold will remain at the same percentage of net sales as in 2017, so if net sales increase in 2018, cost of goods sold will increase proportionately. b hildebrand proposes selling higher-margin merchandise, such as party dresses, in addition to existing product line. an importer can supply a minimum of 1,000 dresses for $40 each; party-time can mark these dresses up 100% and sell them for $80. Hildebrand realizes he will have to advertise the new merchandise, and this advertising will cost $5,000. party-time can expect to sell only 80% of these dresses during the coming year. help hildebrand determine which plan to pursue. prepare a multi-step income statment for 2018 to show the expected net income under each plan.
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.
party-time t-shirts sells t-shirts for parties at the local college. the company completed the first year of operations, and the shareholders are generally please with the operating results from the income statement:
net sales revenue $350,000
cost of goods sold 210,000
gross profit 140,000
operating expenses:
selling expense 40,000
administrative expens 25,000
net income $75,000
bill hildebrand, the controller, is considering how to expand the business. he proposes two ways to increas profits to $100,000 during 2018.
a. hildebrand believes he should advertise more heavily. he believes additional advertising costing $20,000 will increase net sales by 30% and leave administrative expense unchanged. assume cost of goods sold will remain at the same percentage of net sales as in 2017, so if net sales increase in 2018, cost of goods sold will increase proportionately.
b hildebrand proposes selling higher-margin merchandise, such as party dresses, in addition to existing product line. an importer can supply a minimum of 1,000 dresses for $40 each; party-time can mark these dresses up 100% and sell them for $80. Hildebrand realizes he will have to advertise the new merchandise, and this advertising will cost $5,000. party-time can expect to sell only 80% of these dresses during the coming year.
help hildebrand determine which plan to pursue. prepare a multi-step income statment for 2018 to show the expected net income under each plan.
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