Gig Harbor Boating is the wholesale distributor of a small recreational catamara

Question

Gig Harbor Boating is the wholesale distributor of a small recreational catamaran sailboat. Management has prepared the following summary data to use in its annual budgeting process: Budgeted unit sales Selling price per unit Cost per unit Variable selling and administrative expenses (per unit) Fixed selling and administrative expenses (per year) Interest expense for the year 780 $ 2,110 $1,615 $ 55 $300,000 $ 27,000 Required: Prepare the company's budgeted income statement using an absorption income statement format shown below. Gig Harbor Boating Budgeted Income Statement

Explanation / Answer

Budgeted Income statement

Sales (780 x $2110) $1645800 Cost of goods sold (780 x $1615) 1259700 Gross margin $386100 Selling and administrative expense [(780 x $55) + $300000] 342900 Net operating income $43200 Interest expense 27000 Net income $16200

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