Budgeted Income Statement

Coral Seas Jewelry Company makes and sells costume jewelry. For the coming year, Coral Seas expects sales of $15,400,000 and cost of goods sold of $8,470,000. Advertising is a key part of Coral Seas' business strategy, and total marketing expense for the year is budgeted at $2,772,000. Total administrative expenses are expected to be $616,000. Coral Seas has no interest expense. Income taxes are paid at the rate of 40 percent of operating income.

Required:

1. Construct a budgeted income statement for Coral Seas Jewelry Company for the coming year.

Coral Seas Jewelry Company
Budgeted Income Statement
For the Coming Year
Sales		$fill in the blank 95aa69027036fa1_2
Less: Cost of goods sold		fill in the blank 95aa69027036fa1_4
Gross margin		$fill in the blank 95aa69027036fa1_5
Less:
Marketing expense	$fill in the blank 95aa69027036fa1_7
Administrative expense	fill in the blank 95aa69027036fa1_9	fill in the blank 95aa69027036fa1_10
Operating income		$fill in the blank 95aa69027036fa1_11
Less: Income taxes		fill in the blank 95aa69027036fa1_13
Net income		$fill in the blank 95aa69027036fa1_15

Feedback

The budgeted income statement pulls the results of all the operating budgets together and helps managers determine what the companys performance will be by the end of the year. If the manager does not like the net income then they must go back and find ways to increase sales and/or decrease expenses.

2. What if Coral Seas had interest payments of $462,000 during the year? What effect would that have on operating income? On income before taxes? On net income? If no effect, select "no impact" and enter "0".

Operating income	No Impact	to	$fill in the blank 124fc8024f8ff84_2
Income before taxes	Decrease	to	$fill in the blank 124fc8024f8ff84_4
Net income	Decrease	to	$fill in the blank 124fc8024f8ff84_6