Exhibit 9-2
Bowline Inc.is a distributor which sells one product for $60 per unit.Bowline pays $33 to buy the product.In addition,fixed costs total $42,000 per month.Bowline wishes to maintain an inventory at the end of each month equal to 25% of the next month's projected sales.Purchases are paid in the month after purchase.
Bowline makes all sales on credit and collects 30% in the month of sale and 70% in the month after sale.Budgeted monthly sales in units for the first five months of 2013 are as follows:
$\begin{array}{ll}
\text { January } & 20,000 \text { units } \
\text { February } & 25,000 \text { units } \
\text { March } & 28,000 \text { units } \
\text { April } & 30,000 \text { units } \
\text { May } & 26,000 \text { units }
\end{array}$
-Refer to Exhibit 9-2.What will budgeted net income be for March?
A)$1,638,000
B)$714,000
C)$657,300
D)$184,800
E)None of the answer choices is correct.

Question

Exhibit 9-2
Bowline Inc.is a distributor which sells one product for $60 per unit.Bowline pays $33 to buy the product.In addition,fixed costs total $42,000 per month.Bowline wishes to maintain an inventory at the end of each month equal to 25% of the next month's projected sales.Purchases are paid in the month after purchase.
Bowline makes all sales on credit and collects 30% in the month of sale and 70% in the month after sale.Budgeted monthly sales in units for the first five months of 2013 are as follows:
 $\begin{array}{ll}
\text { January } & 20,000 \text { units } \
\text { February } & 25,000 \text { units } \
\text { March } & 28,000 \text { units } \
\text { April } & 30,000 \text { units } \
\text { May } & 26,000 \text { units }
\end{array}$
-Refer to Exhibit 9-2.What will budgeted net income be for March?
A)$1,638,000
B)$714,000
C)$657,300
D)$184,800
E)None of the answer choices is correct.

Quizplus · Accepted Answer

To calculate the budgeted net income for March, first calculate the sales revenue (28,000 units x $60 = $1,680,000). Then, calculate the cost of goods sold (COGS) for March. The COGS is based on the units sold (28,000 units) and the cost per unit ($33), which equals $924,000. Subtract the COGS and fixed costs ($42,000) from the sales revenue to get the net income: $1,680,000 - $924,000 - $42,000 = $714,000.

Exhibit 9-2 Bowline Inc -Refer to Exhibit 9-2

Exhibit 9-2
Bowline Inc -Refer to Exhibit 9-2