Fortune, Inc., is preparing its master budget for the first quarter. The company
ID: 2381057 • Letter: F
Question
Fortune, Inc., is preparing its master budget for the first quarter. The company sells a single product at a price of $25 per unit. Sales (in units) are forecasted at 42,000 for January, 62,000 for February, and 52,000 for March. Cost of goods sold is $12 per unit. Other expense information for the first quarter follows.
Commissions 11 % of sales
Rent $ 18,000 per month
Advertising 12 % of sales
Office salaries $ 78,000 per month
Depreciation $ 47,000 per month
Interest 11 % annually on a $260,000 note payable
Tax rate 30 %
I need the commisions exspense, advertising exspense, interrest expense and Income Tax expense #s
Would be nice to get how they were calculated as well
FORTUNE, INC.
Budgeted Income Statement
For Quarter Ended March 31
Sales $3,900,000
Cost of goods sold 1,872,000
Gross profit 2,028,000
Operating expenses
Commissions expense
Rent expense 54,000
Advertising expense
Office salaries expense 234,000
Depreciation expense 141,000
Interest expense
Total operating expenses 429,000
Income before taxes 1,599,000
Income tax expense
Net income $1,599,000
Explanation / Answer
Budgeted Income Statement For Quarter Ended March 31
Sales $3,900,000
Cost of goods sold 1,872,000
Gross profit 2,028,000
Operating expenses
Commissions expense $ 429000
Rent expense 54,000
Advertising expense 468000
Office salaries expense 234,000
Depreciation expense 141,000
Interest expense 7150
Total operating expenses 1333150
Income before taxes 694850
Income tax expense 208455
Net income $ 486,395
Calculation:
Commissions expense = 11 % of sales = 11%*3,900,000= 429000
Advertising expense= 12 % of sales = 12%*3,900,000= 468000
Interest expense = 11 % annually on a $260,000 = 11%*260000*3/12 = $ 7150
Income tax expenses = 30% * 694850 = 208455