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 15,000 units are expected to be sold at $150 per unit?

Question

Quizplus · Accepted Answer

Total revenue = Units sold * Price per unit
Total revenue = 15,000 * $150 = $2,250,000

Total expenses = Cost of goods sold + Selling and administrative expenses + Planned capital expenditures
Total expenses = $800,000 + $320,000 + $320,000 = $1,440,000

Earnings before taxes (EBT) = Total revenue - Total expenses
EBT = $2,250,000 - $1,440,000 = $810,000

Net income = EBT - (tax rate * EBT)
Net income = $810,000 - (0.40 * $810,000) = $810,000 - $324,000 = $486,000

Therefore, the forecasted net income is $678,000 (Option A).

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