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 80,000 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 60,000 T-shirts.

18. In a flexible budget for sales of 60,000 T-shirts, how much would Baskin budget for operating expenses?

A. $238,800.

B. $338,800.

C. $418,400.

D. $318,400.

19. What unit cost did Baskin use in budgeting the cost of goods sold for the year?

A. $6.00

B. $10.25.

C. $17.50.

D. Some other amount.

20. Assume Baskin actually achieves the 60,000 unit sales level, and that net income actually earned at this level was $70,000. A performance report would indicate that net income was:

A. $2,660 over budget.

B. $43,120 under budget.

C. $16,920 under budget.

D. At the budgeted level.

Sales Cost of Goods Sold $1,400,000 820,000 580,000 418,400 Gross Profit Operating Expenses ($100,000 is fixed) Operating Income Income Taxes (30% of Operating income) 161,600 Net Income $113,120