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 1% per month.
What is the budgeted operating income for March 2018?
A) -$18,100
B) $396,550
C) -$59,403
D) $683,100

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 1% per month.
What is the budgeted operating income for March 2018?
A) -$18,100 
B) $396,550 
C) -$59,403 
D) $683,100

Quizplus · Accepted Answer

Sales = $1,010,000. The cost of goods sold = $676,269 ($690,000 × 0.99 × 0.99). Budgeted gross margin for March = $333,731. Budgeted operating expenses = $393,135 (($345,000 × 0.99 × 0.99) + $55,000). Budgeted operating income = -$59,403.

Sherry and John Enterprises Are Using the Kaizen Approach to Budgeting