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Gig Harbor Boating is the wholesale distributor of a small recreational catamaran sailboat. Management has prepared the following summary data to use in its annual budgeting process:

Budgeted unit sales: 460

Selling price per unit: $1,950

Cost per unit: $1,575

Variable selling and administrative expenses (per unit): $75

Fixed selling and administrative expenses (per year) $105,000

Interest expense for the year $14,000

Prepare the company's budgeted income statement using an absorption income statement format.

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Answer:

Net operating income= 17,000

Explanation:

Giving the following information:

Budgeted unit sales: 460

Selling price per unit: $1,950

Cost per unit: $1,575

Variable selling and administrative expenses (per unit): $75

Fixed selling and administrative expenses (per year) $105,000

Interest expense for the year $14,000

Income statement:

Sales= (460*1,950)= 897,000

COGS= (460*1575)= (724,500)

Gross profit= 172,500

Variable selling and administrative expenses= (75*460)= (34,500)

Fixed selling and administrative expenses=(105,000)

EBIT= 33,000

Interest= (14,000)

Net operating income= 17,000

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