Godfrey Company prepared the following budgeted income statement for 2019:

Godfrey Company
Budgeted Income Statement
For the Year Ended December 31, 2019
Unit sales	1,200
Sales Revenue ($550 per unit)	$660,000
Cost of Goods Sold (50% of sales)	330,000
Gross Profit	330,000
Selling and Administrative Expenses (20% of sales)	132,000
Operating Income	$198,000

Requirement 1. Prepare a budgeted income statement with columns for 500 units,1,200 units, and 1,600 units sold.

Godfrey Company

Budgeted Income Statement

For the Year Ended December 31, 2019

Unit sales	500
Sales Revenue
Cost of Goods Sold
Gross Profit
Selling and Administrative Expenses
Operating Income

1,200

1,600

Requirement 2. How might managers use this type of budgeted income statement?

The budgeted income statement prepared in Requirement 1 is a

flexible

static

budget. It allows

GodfreyGodfrey's

managers to plan for

only a single

various

sales level(s).

Requirement 3. How might spreadsheet software such as Excel assist in this type of analysis?

Technology, such as Excel spreadhseet software, makes it more

cost-effective

time-consuming

to conduct

financial statement analysis

sensitivity or "what-if" analysis

and prepare a company's

annual report.

master budget.

If managers have a better understanding of how changes in sales volume and costs are likely to affect

net income

the annual report

, they can

maintain the same course of action

react quickly and make changes if key assumptions turn out to be wrong.

and,

Swenson, Inc., sells tire rims. Its sales budget and inventory, purchases, and cost of goods sold budget for the nine months ended September 30, 2018,follow:

Swenson, Inc.
Sales Budget
Nine Months Ended September 30, 2018
	Quarter Ended			Nine-Month
	March 31	June 30	September 30	Total
Cash sales, 20%	$20,000	$30,000	$25,000	$75,000
Credit sales, 80%	80,000	120,000	100,000	300,000
Total sales	$100,000	$150,000	$125,000	$375,000

Swenson, Inc.
Inventory, Purchases, and Cost of Goods Sold Budget
Nine Months Ended September 30, 2018
		Quarter Ended	Quarter Ended	Quarter Ended	Nine-Month
		March 31	June 30	September 30	Total
Cost of goods sold		$40,000	$60,000	$50,000	$150,000
Plus:	Desired ending merchandise inventory	$34,000	$33,000	$36,000
Total merchandise inventory required		$74,000	$93,000	$86,000
Less:	Beginning merchandise inventory	$19,000	$34,000	$33,000
Budgeted purchases		$55,000	$59,000	$53,000

Swenson's selling and administrative expenses include the following:

Rent, $1,200 per month

Salaries, $3,800 per month

Commissions, 4% of sales

Depreciation, $800 per month

Miscellaneous expenses, 2% of sales

Prepare a selling and administrative expense budget for each of the three quarters of 2018 and totals for the nine-month period.

Swenson, Inc.
Selling and Administrative Expense Budget
Nine Months Ended September 30, 2018
		Quarter	Quarter	Quarter
		Ended	Ended	Ended	Nine-month
		March 31	June 30	September 30	Total
	Variable expenses:
	Total variable expenses
	Fixed expenses:
	Total fixed expenses
	Total selling and administrative expenses