Question

Tile Co. Income Statement Budget

sales volume, unit: 3,000 Sales: 18.00 Variable product: 6.50 variable selling and admin: 3.50 contribution margin: 8.00 fixed product: 2.00 fixed variable selling and admin: 0.70 operating income: 5.30

Tile Co. is budgeting for next year. Their initial budget is shown above. If they wish to budget for 8,000 units, what would the new budgeted profit be? Enter as a whole number, no commas and no dollar signs.

Answer 1

While preparing the Budgeted Income Statement, one needs to keep in mind that Fixed cost will remain same irrespective of the no of units sold. Variable cost will change depending on the the no of units sold.

Fixed cost is given as $2 per unit when 3,000 units were sold, that means Total fixed cost = 3,000*$2= $6,000.

Likewise, fixed variable selling and admin will be 3000*0.7= $2,100.

Theses will reman same even when 8,000 units are to be produced.

So the Budgeted Income Statement when 8000 units are sold, will be as follows:

Tile Co.
Budgeted Income Statement
Particulars	Basis	$
Sales	(8000 units*$18)	144000
Less: Expenses
Variable Cost	(8000 units*$6.5)	52000
Variable Selling and Admin	(8000 units*$3.5)	28000
Contribution		64000
Fixed Product	(3000*$2)	6000
Fixed variable selling and admin	(3000*$0.7)	2100
Budgeted Profit		55900

Therefore, the new budgeted profit will be $55,900.