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Kling Company prepared the following budgeted income statement for the first quarter of 2018: (Click the icon to view the budgeted income statement.) Kling Company
Kling Company prepared the following budgeted income statement for the first quarter of 2018: (Click the icon to view the budgeted income statement.) Kling Company is considering two options. (Click the icon to view the options.) Read the requirements. ... Requirement 1. Prepare budgeted income statements for both options, assuming both options begin in January and January sales remain $25,000. Round all calculations to the nearest dollar. Begin by preparing the budgeted income statement for Option 1. Kling Company Budgeted Income Statement For the Quarter Ended March 31, 2018 January February March Total Sales Revenue Cost of Goods Sold Gross Profit S and A Expenses Operating Income Income Tax Expense Net Income Now prepare the budgeted income statement for Option 2. (Round all amounts to the nearest whole number.) Now prepare the budgeted income statement for Option 2. (Round all amounts to the nearest whole number.) Kling Company Budgeted Income Statement For the Quarter Ended March 31, 2018 January February March Total Sales Revenue Cost of Goods Sold Gross Profit S and A Expenses Operating Income Income Tax Expense Net Income Requirement 2. Which option should Kling choose? Explain your reasoning. because net income for the quarter is expected to be higher under this option. However, because both options are expected to yield V net income for the quarter than the $42,304 If one of the two options is chosen, it would be currently budgeted, Kling may decide Enter any number in the edit fields and then continue to the next question. - Data Table March Total Kling Company Budgeted Income Statement For the Quarter Ended March 31, 2018 January February Net Sales Revenue (20% increase per month) $ 25,000 $ 30,000 $ Cost of Goods Sold (20% of sales) 5,000 6,000 Gross Profit 20,000 24,000 S and A Expenses ($3,000 + 12% of sales) 6,000 6,600 Operating Income 14,000 17,400 Income Tax Expense (20% of operating income) 2,800 3,480 Net Income $ 11,200 $ 13,920 $ 36,000 $ 7,200 91,000 18,200 28,800 72,800 7,320 19,920 52,880 21,480 4,296 17,184||$ 10,576 42,304 Print Done More Info Option 1 is to increase advertising by $1,000 per month. Option 2 is to use better-quality materials in the manufacturing process. The better materials will increase the cost of goods sold to 25% but will provide a better product at the same sales price. The marketing manager projects either option will result in sales increases of 25% per month rather than 20%. Print Done -X Requirements 1. Prepare budgeted income statements for both options, assuming both options begin in January and January sales remain $25,000. Round all calculations to the nearest dollar 2. Which option should Kling choose? Explain your reasoning. Print Done
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