Question

Answer the following questions using the information below:

Kramer Enterprises reports year-end information from 2015 as follows:

Sales (160,000 units) $960,000
Cost of goods sold 640,000
Gross margin 320,000
Operating expenses 260,000
Operating income $60,000

Kramer is developing the 2016 budget. In 2016 the company would like to increase selling prices by 12.5%, and as a result expects a decrease in sales volume of 9%. All other operating expenses are expected to remain constant. Assume that cost of goods sold is a variable cost and that operating expenses are a fixed cost.

*6) What is budgeted sales for 2016?*
A) $1,080,000
B) $1,000,000
C) $982,800
D) $873,600
Objective 6.4

Answer 1

The budgeted sales for 2016 is $1,080,000.

Step-by-step explanation:

To determine the budgeted sales for 2016, we need to calculate the expected sales revenue based on the given information. First, we calculate the new selling price by increasing the current price by 12.5%. This gives us 1.125 times the current price.

The expected sales volume for 2016 will be 91% (100% - 9%) of the current sales volume. Therefore, the budgeted sales for 2016 can be calculated by multiplying the new selling price by the expected sales volume.

In this case, the budgeted sales for 2016 would be $1,080,000.