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 74,000 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 54,000 T-shirts.

$214,920.

$314,920.

$394,520.

$294,520.

$5.90

$10.19.

$17.44.

Some other amount.

Assume Baskin actually achieves the 54,000 unit sales level, and that net income actually earned at this level was $56,200. A performance report would indicate that net income was:

$2,594 over budget.

$43,186 under budget.

$22,806 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 74,000 T-shirts:

  Sales $ 1,290,560   Cost of Goods Sold 754,060   Gross Profit 536,500   Operating Expenses ($100,000 is fixed) 394,520   Operating Income 141,980   Income Taxes (30% of Operating income) 42,594   Net Income $ 99,386

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 54,000 T-shirts.

In a flexible budget for sales of 54,000 T-shirts, how much would Baskin budget for operating expenses?

$214,920.

$314,920.

$394,520.

$294,520.

Explanation / Answer

Q .1) In a flexible budget for sales of 54,000 T-shirts, how much would Baskin budget for operating expenses:-

Conclusion:- In a flexible budget for sales of 54,000 T-shirts, Baskin would budget for total operating expenses amounting to $ 314920

Q. 2.)  Baskin used unit cost in budgeting the cost of goods sold for the year = 754060 / 74000

= $ 10.19

Conclusion:- $ 10.19

Q. 3.) A performance report would indicate that net income was $43,186 under budget.

Note: = 99386 - 56200 = $ 43186

Conclusion:- $43,186 under budget.

Particulars On 54000 Units Fixed Cost 100000 Variable cost = (394520 - 100000) / 74000 = 3.98 Per unit 214920 (54000 * 3.98) Total 314920

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