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 income will be:
A) $9,000
B) $15,600
C) $14,400
D) None of the above

Question

Quizplus · Accepted Answer

Net income = $18,000 * 50% = $9,000Operating costs + cost of goods sold = $9,000 * 40% = $3,600Cost of goods sold = $3,600 * 2 = $7,200Operating income = $9,000 - $7,200 = $1,800

TNR Corporation Is Preparing Its Budgeted Income Statement for the Month