Question
The sales budget is often used as the starting point for the selling and administrative expenses budget. For example, a budgeted increase in sales may
The sales budget is often used as the starting point for the selling and administrative expenses budget. For example, a budgeted increase in sales may require more advertising expenses. LearnCo has prepared its selling and administrative expenses budget as follows. This budget is merely reviewed by you for use in the budgeted income statement.
LearnCo | ||
Selling and Administrative Expenses Budget | ||
For the Year Ending December 31, 20Y2 | ||
Selling expenses: | ||
Sales salaries expense | $45,000 | |
Advertising expense | 15,000 | |
Travel expense | 5,400 | |
Total selling expenses | $65,400 | |
Administrative expenses: | ||
Officers' salaries expense | $85,000 | |
Office salaries expense | 35,000 | |
Office rent expense | 26,000 | |
Office supplies expense | 6,400 | |
Miscellaneous administrative expenses | 1,600 | |
Total administrative expenses | 154,000 | |
Total selling and administrative expenses | $219,400 |
The budgeted income statement is prepared by integrating the sales budget, cost of goods sold budget, and selling and administrative expenses budget. Additional information that may be helpful in preparing the budgeted income statement are in the following Budgeted Income Statement Data Table.
Review the Budgeted Income Statement Data Table, then complete the budgeted income statement that follows the table. Round the computed amount for income tax to the nearest whole dollar. Enter all amounts as positive numbers.
Budgeted Income Statement Data Table | |
Interest revenue for the year | $2,000 |
Interest expense for the year | $1,500 |
LearnCos income tax rate | 40% |
LearnCo |
Budgeted Income Statement |
For the Year Ending December 31, 20Y2 |
1 | Revenue from sales |
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2 | Cost of goods sold |
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3 | Gross profit |
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4 | Selling and administrative expenses: |
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5 | Selling expenses |
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6 | Administrative expenses |
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7 | Total selling and administrative expenses |
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8 | Income from operations |
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9 | Other revenue and expense: |
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10 | Interest revenue |
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11 | Interest expense | ||
12 | Income before income tax |
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13 | Income tax |
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14 | Net income |
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1. LearnCos controller believes that the company can decrease its selling expenses by 10% and its administrative expenses by 15%. How much would income before income tax increase if these expense cuts are implemented? Round your answer to the nearest dollar.
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