Trombatore Corporation provided the following budget information: UNIT SALES: Au

Question

Trombatore Corporation provided the following budget information:

UNIT SALES:

August                12,000
September          16,000
October               21,000
November           20,000

-The budget sales price for each unit is $20
- The company budget production so that ending Finished Goods Inventory equals 20 % of next month's budgeted sales.
- The total cost (including direct materials, Direct labor, and overhead) to produce each unit is $7.
- Selling and administrative expenses are budgeted at $30,000 per month PLUS 25% of total sales revenue.

A) Budgeted sales revenue for the month of October equals:

B) Budgeted production (in units) for the month of August equals:

C) Budgeted operating income for the month of October equals:

Explanation / Answer

A) Budgeted sales revenue for the month of October equals: 21000 * 20 = $420000

B) Budgeted production (in units) for the month of August equals: 12000 * 80% + 16000 * 20% = 12800 units

C) Budgeted operating income for the month of October equals:

Revenue = $420000

- Total cost 4200 + 20800 - 4000 = 21000 * 7 = $147000

- Selling & Admin Exp. = 30000 + 420000 * 25%= $135000

Operating Income for the month October = $138000

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