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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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