Fortune, Inc., is preparing its master budget for the first quarter. The company
ID: 2600163 • 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 36,000 for January, 56,000 for February, and 46,000 for March. Cost of goods sold is $12 per unit. Other expense information for the first quarter follows.
Commissions 11% of sales dollars Rent$19,000 per month Advertising 14% of sales dollars Office salaries$73,000 per month Depreciation$46,000 per month Interest 12% annually on a $200,000 note payable Tax rate 30%
Explanation / Answer
FORTUNE INC
Budgeted income statement for the quarter ended March 31
Sales [138000 units * $25] $3450000
Cost of goods sold [138000 units * $12] ($1656000)
Gross profit $1794000
Commission [ $3450000 * 11%] ($379500)
Rent [ $19000 * 3 ] ($57000)
Advertising [$3450000 * 14%] ($483000)
Office salaries [$73000 * 3] ($219000)
Depreciation ($46000 * 3) ($138000)
Interest expense ($200000 * 12% * 3/12) ($6000)
Income before tax $511500
Income tax rate 30% ($153450)
Net income $358050.