Baskin Promotions, Inc. sells T-shirts decorated for a variety of concert perfor

Question

Baskin Promotions, Inc. sells T-shirts decorated for a variety of concert performers. The company has developed the following budget for the coming year based on a sales forecast of 81,000 T-shirts:

Cost of goods sold and variable operating expenses vary directly with sales, and the income tax rate is 30% at all levels of operating income.

If the concert season is slow due to poor weather, Baskin estimates that sales could fall to as low as 61,000 T-shirts.

$242,780.

$342,780.

$422,380.

$322,380.

$6.02

$10.26.

$17.51.

Some other amount.

3. Assume Baskin actually achieves the 61,000 unit sales level, and that net income actually earned at this level was $72,300. A performance report would indicate that net income was:

$2,671 over budget.

$43,109 under budget.

$15,939 under budget.

At the budgeted level.

Baskin Promotions, Inc. sells T-shirts decorated for a variety of concert performers. The company has developed the following budget for the coming year based on a sales forecast of 81,000 T-shirts:

Sales $ 1,418,310   Cost of Goods Sold 831,060   Gross Profit 587,250   Operating Expenses ($100,000 is fixed) 422,380   Operating Income 164,870   Income Taxes (30% of Operating income) 49,461   Net Income $ 115,409

Cost of goods sold and variable operating expenses vary directly with sales, and the income tax rate is 30% at all levels of operating income.

If the concert season is slow due to poor weather, Baskin estimates that sales could fall to as low as 61,000 T-shirts.

Explanation / Answer

1) option 2 is correct answer

2)

$ 10.26 ( 831,060/81,000)

3)

$ 43,109 under budget budgeted income = 115,409 actual = 72,300 ( 115,409-72,300)

Fixed expense          100,000 variable expense          322,380 units            81,000 per unit variable expense                 3.98 For 61000 units variable expense          242,780 Fixed expense          100,000          342,780

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