Question - Pendleton Company, a merchandising company, is developing its master budget for 2015. The income statement for 2014 is as follows:
Gross Sales: $750,000
Less estimated uncollectible accounts: (7,500)
Net sales: 742,500
Cost of Goods sold:(430,000)
Gross Profit: 312,500
Operating expenses (including $25,000 depreciation): (200,500)
Net income: $112,000
The following are management's goals and forecasts for 2015:
1. Selling prices will increase by 6%, and sales volume will increase by 4%
2. The cost of merchandise will increase by 3%
3. All operating expenses are fixed and are paid in the month incurred. Price increases for operating expenses will be 10%. The company uses straight-line depreciation.
4. The estimated uncollectibles are 2% of budgeted sales.
Required - Prepare a budgeted functional income statement for 2015.