Wallen Company estimated sales of 12,000 units at $44 each, unit cost of goods sold of $22, marketing expense of $70,000, and a 12% commission on the price for each unit sold. Administrative expense is budgeted at $50,000.
-Refer to the Figure.What is Wallen's budgeted operating income?

Question

Quizplus · Accepted Answer

To find budgeted operating income, we need to calculate budgeted revenues, budgeted cost of goods sold, budgeted commissions, budgeted marketing expense, and budgeted administrative expense.

Budgeted revenues = Estimated sales x unit price = 12,000 x $44 = $528,000

Budgeted cost of goods sold = Estimated sales x unit cost of goods sold = 12,000 x $22 = $264,000

Budgeted commissions = (12% x unit price) x estimated sales = (0.12 x $44) x 12,000 = $63,360

Total budgeted expenses = budgeted cost of goods sold + budgeted commissions + budgeted marketing expense + budgeted administrative expense 
= $264,000 + $63,360 + $70,000 + $50,000 
= $447,360

Budgeted operating income = budgeted revenues - total budgeted expenses 
= $528,000 - $447,360 
= $80,640

Therefore, the budgeted operating income for Wallen Company is $80,640. Answer choice A is correct.

Wallen Company Estimated Sales of 12,000 Units at $44 Each