Butler Corporation has three divisions, each operating as a responsibility center. To provide an incentive for divisional executive officers, the company gives divisional management a bonus equal to 17 percent of the excess of actual net income over budgeted net income. The following is French Divisions current years performance. Current Year Sales revenue $ 4,160,000 Cost of goods sold 2,440,000 Gross profit 1,720,000 Selling & admin. expenses 800,000 Net income $ 920,000 The president has just received next years budget proposal from the vice president in charge of French Division. The proposal budgets a 7 percent increase in sales revenue with an extensive explanation about stiff market competition. The president is puzzled. French has enjoyed revenue growth of around 12 percent for each of the past five years. The president had consistently approved the divisions budget proposals based on 7 percent growth in the past. This time, the president wants to show that he is not a fool. I will impose a 17 percent revenue increase to teach them a lesson! the president says to himself smugly. Assume that cost of goods sold and selling and administrative expenses remain stable in proportion to sales.

Required a. Prepare the budgeted income statement based on French Division's proposal of a 7 percent increase BUTLER CORPORATION Budgeted Income Statement Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income b. If growth is actually 12 percent as usual, how much bonus would French Division's executive officers receive if the president had approved the division's proposal? Bonus