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.

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:

Explanation / Answer

Baskin estimates that sales if falls to 54,000 T-shirts:

  

Particulars Estimate for 74000 t-shirts Per T-shirt Estimate for 54000 t-shirts   Sales $ 1,290,560 $17.44 $941760   Cost of Goods Sold 754,060 10.19 550260   Gross Profit 536,500 391500   Operating Expenses ($100,000 is fixed) 394,520 $100,000 fixed + $3.98 per t-shirt 314920   Operating Income 141,980 76,580   Income Taxes (30% of Operating income) 42,594 22,974   Net Income $ 99,386 $53606

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