Christy Enterprises reports the year-end information from 2015 as follows: Sales

Question

Christy Enterprises reports the year-end information from 2015 as follows: Sales (150,000 units) Less: Cost of Goods Sold Gross profit Operating expenses (includes S25,000 of depreciation) Net Income $450,000 150,000 $300,000 $100,000 $200,000 Christy is developing the 2016 budget. In 2016 the company expects to increase selling prices by 20% and as a result expects a decrease in sales volume of 10%. Cost of goods sold as a percentage of sales is expected to increase to 40%. Other than depreciation, all operating costs are variable. Required: Complete the budgeted income statement for 2016 below. Show all computations. Sales? Cost of goods sold? Gross profit? Less: Operating Expenses? Net Income?

Explanation / Answer

Budgeted income statement :

Sales (135000*3.6) 486000 Less: Cost of goods sold (486000*40%) 194400 Gross profit 291600 Less: Operating income (135000*.50+25000) 92500 Net income 199100

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