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 81,000 T-shirts: Sales $ 1,418,310
Cost of Goods Sold 831,060
Gross Profit 587,250
Operating Expenses ($100,000 is fixed) 422,380
Operating Income 164,870
Income Taxes (30% of operating income) 49,461
Net Income $ 115,409
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 61,000 T-shirts.
1. In a flexible budget for sales of 61,000 T-shirts, how much would Baskin budget for operating expenses?
a. $242,780.
b. $342,780.
c. $422,380.
d. $322,380.
2. What unit cost did Baskin use in budgeting the cost of goods sold for the year?
a. $6.02
b. $10.26.
c. $17.51.
d. Some other amount.