Required information The following information applies to the questions displaye

Question

Required information The following information applies to the questions displayed below Baskin Promotions, Inc. sells T-shirts decorated for a variety of concert performers. The company has developed the following budget for the coming year based on a sales forecast of 81,000 T-shirts: Sales Cost of Goods Sold Gross Profit Operating Expenses ($100,000 is fixed) Operating Income Income Taxes (308 of operating income) Net Income $1,418,310 831,060 587,250 422,380 164,870 49,461 115,409 Cost of goods sold and variable operating expenses vary directly with sales, and the income tax rate is 30% at all levels of operating income. If the concert season is slow due to poor weather, Baskin estimates that sales could fall to as low as 61,000 T-shirts. In a flexible budget for sales of 61,000 T-shirts, how much would Baskin budget for operating expenses?

Explanation / Answer

Answer is $ 342780 Explanation: At 81,000 units, Total Operating expense 422,380 Less: Fixed Expense 100,000 Variable Operating Expense 322380 Number of units 81,000 Variable Operating expense per unit 3.98 Now, for 61,000 units, the operating expense will be: Fixed cost 100,000 Variable ccost (61000 units @3.98) 242780 Total Operating expense 342780

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