THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 34 AND 35. Katie Enterprises repo

Question

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 34 AND 35.

Katie Enterprises reports the year-end information from 20X4 as follows:

Katie is developing the 20X5 budget. In 20X5 the company would like to increase selling prices by 4%, and as a result expects a decrease in sales volume of 10%. All other operating expenses are expected to remain constant. Assume that COGS is a variable cost and that operating expenses are a fixed cost.

Sales (70,000 units) $560,000 Cost of goods sold 210,000 Gross margin 350,000 Operating expenses 200,000 Operating income $150,000

Explanation / Answer

B) $524,160

Budgeted Sale = (70000-10%*70000)* (560000/70000 * 104%) = $524160

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