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.

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