Assume that the forecasted cost of goods sold is $800,000, budgeted selling and administrative expenses are $320,000, planned capital expenditures are $320,000, and the tax rate is 40 percent. What is the forecasted net income if each unit will sell for $150 and the sales forecast is for 15,000 units to be sold?

Question

Quizplus · Accepted Answer

The forecasted net income is calculated as follows: Revenue from sales (15,000 units x $150) = $2,250,000. Subtract cost of goods sold ($800,000) and selling/administrative expenses ($320,000) to get operating income of $1,130,000. Taxable income is $1,130,000, and after 40% tax ($452,000), the net income is $678,000. Capital expenditures do not affect net income calculation.

Assume That the Forecasted Cost of Goods Sold Is $800,000