TNR Corporation is preparing its budgeted income statement for the month of August. Budgeted sales are $18,000. Cost of goods sold is twice the amount of operating costs, and operating costs plus cost of goods sold equals 40% of net income. Return on sales (net income / sales)is anticipated to be 50%. TNR does not have any nonoperating items on its income statement. TNR's budgeted operating costs are:
A)$3,600
B)$2,400
C)$1,200
D)None of the above

Question

Quizplus · Accepted Answer

To solve this problem, we need to use the given information to calculate the various components of TNR Corporation's budgeted income statement.

Given:

Budgeted sales = $18,000

Return on sales = 50%

Cost of goods sold = 2 x operating costs

Operating costs + cost of goods sold = 40% of net income

To calculate:

Net income = Return on sales x Sales = 0.5 x $18,000 = $9,000

Operating costs + cost of goods sold = 40% of net income

Therefore:

Operating costs + 2 x operating costs = 0.4 x $9,000

3 x operating costs = $3,600

Operating costs = $1,200

Therefore, the best choice is C) $1,200, as this is the budgeted operating costs based on the given information.

TNR Corporation Is Preparing Its Budgeted Income Statement for the Month