Fortune, Inc., is preparing its master budget for the first quarter. The company sells a single product at a price of $25 per unit. Sales (in units) are forecasted at 39,000 for January, 59,000 for February, and 49,000 for March. Cost of goods sold is $12 per unit. Other expense information for the first quarter follows. Commissions 11 % of sales dollars Rent $ 20,000 per month Advertising 12 % of sales dollars Office salaries $ 74,000 per month Depreciation $ 49,000 per month Interest 11 % annually on a $270,000 note payable Tax rate 40 % Prepare a budgeted income statement for this first quarter. (Round your final answers to the nearest whole dollar.)

Budgeted Income Statement For Quarter Ended March 31

Sales $3,675,000

Cost of goods sold $1,764,000

Gross profit $1,911,000

Operating expenses

Commissions expense $404,250  

Rent expense $60,000

Advertising expense $441,000

Office salaries expense $222,000

Depreciation expense $147,000

Interest expense $ 7,425

Total operating expenses $1,281,675

Income before taxes $629,325

Income tax expense $251,730

Net income $ 377,595

Explanation:

Commissions 11 % of sales dollars

Rent $ 20,000 per month

Advertising 12 % of sales dollars

Office salaries $ 74,000 per month

Depreciation $ 49,000 per month

Interest 11 % annually on a $270,000 note payable

Tax rate 40%

Sales = Number of units for first quarter   × price per unit

= (39,000 + 59,000 + 49,000) × $25

= $3,675,000

Cost of goods = (39,000 + 59,000 + 49,000) × $12

= $1,764,000

Commissions expense = 11 % of sales = 11% × $3,675,000 = $404,250

Advertising expense = 12 % of sales = 12% × $3,675,000 = $441,000

Interest expense = 11 % annually on a $270,000

= 11% × 270,000 × 3/12

= $ 7,425

Income = Gross profit - total operating expenses

= $1,911,000  - $1,281,675

= $629,325

Income tax expenses = 40% × $629,325 = $251,730

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