Baskin Promotions, Inc. sells T-shirts decorated for a variety of concert performers. The company has developed the following budget for the coming year based on a sales forecast of 79,000 T-shirts:
Sales......................................................................$ 1,381,710
Cost of Goods Sold....................................................808,960
Gross Profit................................................................572,750
Operating Expenses ($100,000 is fixed)....................414,420
Operating Income.......................................................158,330
Income Taxes (30% of Operating income)..................47,499
Net Income..............................................................$ 110,831
a. Cost of goods sold and variable operating expenses vary directly with sales, and the income tax rate is 30% at all levels of operating income. If the concert season is slow due to poor weather, Baskin estimates that sales could fall to as low as 59,000 T-shirts. In a flexible budget for sales of 59,000 T-shirts, how much would Baskin budget for operating expenses?
1. $234,820
2. $334,820
3. $414,420
4. $314,420
b. What unit cost did Baskin use in budge the cost of goods sold for the year?
$5.98
$10.24
$17.49
Some other amount
c. Assume Baskin actually achieves the 59,000 unit sales level, and that net income actually earned at this level was $67,700. A performance report would indicate that net income was:
1. $2,649 over budget
2. $43,131 under budget
3. $17,901 under budget
4. At the budgeted level