A company has the following budget information: Sales: $118,800; COGS: $48,500; Depreciation expense: $1,500; Interest expense: $250; Other expenses: $41,880. If the company budgets 40% for income tax expense, the amount of budgeted income tax expense will be $

The amount of budgeted income tax expense will be $10,668

Explanation:

First determine the Earnings before tax then apply the Budgeted Tax expense rate on the Earnings before tax to establish the budgeted Income tax expense.

Sales                                                                    $118,800

Less Cost of Goods Sold                                   ($48,500)

Gross Profit                                                          $70,300

Less Expenses

Depreciation expense                                          ($1,500)

Interest expense                                                     ($250)

Other expenses                                                   ($41,880)

Earnings Before Tax                                            $26,670

Budgeted Tax Expense ( $26,670 × 40%)         ($10,668)

Earnings after interest and tax                             $16,002

$10,688

Explanation:

This can be estimated by preparing the Budgeted Trading, Profit and Loss accounts.

Budgeted Trading, Profit and Loss Accounts

Details                                                              $                        $

Sales                                                                                   118,800  

Cost of goods sold (COGS)                                             (48,500)  

Gross profit                                                                         70,300

Expenses:

Depreciation expense                                (1,500)

Interest expense                                           (250)  

Other expenses                                         (41,880)  

Totals expenses                                                                   (43,630)  

Profit before tax                                                                    26,670

Income tax expense (26,670 × 40%)                               (10,688)  

Profit after tax                                                                        16,002

Therefore, the amount of budgeted income tax expense will be $10,688.

support your answer using the data presented. (5 points). 4. based on the information you used to schedule and curve, which product would you recommend the shoe hut focus on, and why? provide details that support your answer. (5 points).