July, Neptune Company had actual sales of $144,000 compared to budgeted sales of $156,000. Actual cost of goods sold was $108,000, compared to a budget of $109,200. Monthly operating expenses, budgeted at $22,400, totaled $20,000. Interest revenue of $2,000 was earned during July but had not been included in the budget. The performance report for July would show a net income variance of what amount?

Question

Quizplus · Accepted Answer

The net income variance is calculated by comparing actual net income to budgeted net income. The actual net income is $144,000 (sales) - $108,000 (COGS) - $20,000 (expenses) + $2,000 (interest) = $18,000. The budgeted net income is $156,000 (sales) - $109,200 (COGS) - $22,400 (expenses) = $24,400. The variance is $18,000 - $24,400 = $(6,400).

July, Neptune Company Had Actual Sales of $144,000 Compared to Budgeted