Sherry and John Enterprises are using the kaizen approach to budgeting for 2018. The budgeted income statement for January 2018 is as follows:

Under the kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 3% per month.
What is budgeted gross margin for March 2018?
A) $413,996
B) $426,800
C) $466,796
D) $476,642

Question

Sherry and John Enterprises are using the kaizen approach to budgeting for 2018. The budgeted income statement for January 2018 is as follows:

Under the kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 3% per month.
What is budgeted gross margin for March 2018?
A) $413,996 
B) $426,800 
C) $466,796 
D) $476,642

Quizplus · Accepted Answer

Sales = $1,060,000. The cost of goods sold for the month of March = $583,358 ($620,000 × 0.97 × 0.97). Therefore, the budgeted gross margin for March is $476,642.

Sherry and John Enterprises Are Using the Kaizen Approach to Budgeting