Prepare a budgeted quarterly income statement in tabular form for the first quarter of 2017.
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.
The Midwest Regional Division of Union Corp. has been requested to prepare a quarterly
The corporate head office has requested that the regional manager maintain an inventory in dollars equal to 25% of the next quarter's sales. Quarterly purchases average 55% of quarterly sales. Budgeted ending inventory on December 31, 2016 is $176,000. Quarterly salaries are $20,000 plus 5% of sales. All salaries are classified as sales salaries. Other quarterly expenses are estimated to be as follows:
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Rent expense $24,000 Depreciation on office equipment $12,000 Utilities expense $3,600 Miscellaneous expenses 2% of sales The income statement for the first quarter of 2016 was as follows: Income Statement For the Quarter Ended March 31, 2016 |
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Sales ...................................................................................................... |
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$720,000 |
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Cost of goods sold.................................................................................. |
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396,000 |
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Gross profit............................................................................................. Operating expenses |
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324,000 |
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Sales salaries.................................................................................. |
$52,000 |
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Rent expense.................................................................................. |
24,000 |
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Depreciation.................................................................................... |
12,000 |
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Utilities ............................................................................................ |
3,600 |
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Miscellaneous ................................................................................. 12,800
Total operating expenses......................................................... 104,400 Net income ............................................................................................. $219,600
Instructions
Prepare a budgeted quarterly income statement in tabular form for the first quarter of 2017. (Show computations.)
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