Katie Enterprises reports the year-end information from 20X8 as follows: Sales (

Question

Katie Enterprises reports the year-end information from 20X8 as follows: Sales (70,000 units) $560,000; Cost of goods sold 210,000; Gross margin 350,000; Operating expenses 200,000; Operating income $150,000. Katie is developing the 20X2 budget. In 20X2, 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. What is budgeted operating income for 20X2? $135,160 $145,160 $125,160 $130,160

Explanation / Answer

ANswer is $135160

Working Note

Particulars 20x8 20x2 Sale Price              8.00                 8.32 Sales Units    70,000.00      63,000.00 Total Sales 560000 524160 Less: Cost of Goods sold 210000    189,000.00 Gross Margin 350000 335160 Less: Operating Expenses 200000 200000 Operating Income 150000 135160

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