Reference no: EM133033089
Question - Baskin Promotions, Incorporated sells T-shirts decorated for a variety of concert performers. The company has developed the following budget for the coming year based on a sales forecast of 80,000 T-shirts:
Sales $1,400,000
Cost of Goods Sold 820,000
Gross Profit 580,000
Operating Expenses ($100,000 is fixed) 418,400
Operating Income 161,600
Income Taxes (30% of operating income) 48,480
Net Income $113,120
Cost of goods sold and variable operating expenses vary directly with sales, and the income tax rate is 30% at all levels of operating income.
If the concert season is slow due to poor weather, Baskin estimates that sales could fall to as low as 60,000 T-shirts.
Assume Baskin actually achieves the 60,000 unit sales level, and that net income actually earned at this level was $70,000. What the net income was that performance report would indicate.
a. $43,120 under budget.
b. $90,000 under budget.
c. $2,660 over budget.
d. At the budgeted level