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 45,000 for January, 55,000 for February, and 50,000 for March. Cost of goods sold is $14 per unit. Other expense information for the first quarter follows. Commissions 8 % of sales dollars Rent $ 14,000 per month Advertising 15 % of sales dollars Office salaries $ 75,000 per month Depreciation $ 40,000 per month Interest 5 % annually on a $250,000 note payable Tax rate 30 % Prepare a budgeted income statement for this first quarter. (Round your final answers to the nearest whole dollar.)

Fortune, Inc.

Budgeted Income Statement for the first quarter

Sales Revenue                    $3,750,000

Cost of goods sold                2,100,000

Gross profit                         $1,650,000

Expenses

Sales commission                   300,000

Rent                                           42,000

Advertising                             562,250

Office salaries                        225,000

Depreciation                           120,000

Interest                                        3,125

Total expenses                 $1,252,375

Income before tax              $397,625

Tax (30%)                                119,288

Net income                         $278,337

Explanation:

a) Data and Calculations:

Selling price per unit = $25

                                       January       February         March          Total

Sales (in units)                 45,000        55,000         50,000       150,000

Sales revenue           $1,125,000 $1,375,000  $1,250,000  $3,750,000

Cost of goods sold       630,000     770,000       700,000     2,100,000

Gross profit                $495,000   $605,000    $550,000  $1,650,000

Expenses:

Sales commission        $90,000    $110,000     $100,000    $300,000

Rent expense                  14,000        14,000         14,000         42,000

Advertising expense    168,750     206,250       187,500      562,250

Office salaries                75,000       75,000        75,000      225,000

Depreciation                  40,000       40,000        40,000       120,000

Interest expense                                                                           3,125

Total expenses                                                                   $1,252,375

Income before tax                                                                $397,625

Tax (30%)                                                                                  119,288

Net income                                                                           $278,337

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