Campbell Corporation has three divisions, each operating as a responsibility center. To provide an incentive for...

Campbell Corporation has three divisions, each operating as a responsibility center. To provide an incentive for divisional executive officers, the company gives divisional management a bonus equal to 15 percent of the excess of actual net income over budgeted net income. The following is Atlantic Division’s current year’s performance:

**What is requirement B2? Please assist & how did you get the answer***

	Current Year
Sales revenue		$	4,150,000
Cost of goods sold			2,410,000
Gross profit			1,740,000
Selling & administrative expenses			810,000
Net income		$	930,000

The president has just received next year’s budget proposal from the vice president in charge of Atlantic Division. The proposal budgets a 3 percent increase in sales revenue with an extensive explanation about stiff market competition. The president is puzzled. Atlantic has enjoyed revenue growth of around 8 percent for each of the past five years. The president had consistently approved the division’s budget proposals based on 3 percent growth in the past. This time, the president wants to show that he is not a fool. “I will impose a 13 percent revenue increase to teach them a lesson!” the president says to himself smugly.

Assume that cost of goods sold and selling and administrative expenses remain stable in proportion to sales.

Required

a. Prepare the budgeted income statement based on Atlantic Division’s proposal of a 3 percent increase.

b-1. Prepare income statement with 8% growth.

b-2. If growth is actually 8 percent as usual, how much bonus would Atlantic Division’s executive officers receive if the president had approved the division’s proposal?

c. Prepare the budgeted income statement based on the 13 percent increase the president imposed.

d. If the actual results turn out to be a 8 percent increase as usual, how much bonus would Atlantic Division’s executive officers receive since the president imposed a 13 percent increase?

Requirement A

CAMPBELL CORPORATION
Budgeted Income Statement
Sales revenue	$4,689,500
Cost of goods sold
Gross profit	4,689,500
Selling & administrative expenses
Net income	$4,689,500
Bonus	0

Requirement B1

CAMPBELL CORPORATION
Income Statement

Sales revenue	$4,482,000
Cost of goods sold	2,602,800
Gross profit	$1,879,200
Selling & administrative expenses	874,800
Net income	$1,004,400

Requirement B

If growth is actually 8 percent as usual, how much bonus would Atlantic Division’s executive officers receive if the president had approved the division’s proposal?

What is the Bonus??????

Bonus

Requirement C & D

CAMPBELL CORPORATION
Budgeted Income Statement
Sales revenue	$4,689,500
Cost of goods sold
Gross profit	4,689,500
Selling & administrative expenses
Net income	$4,689,500
Bonus	0

Solutions

Expert Solution

ekkarill92 answered 1 year ago

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