Kern Company Prepared the Following Tentative Budget for Next Year

question 76

Multiple Choice

Kern Company prepared the following tentative budget for next year: $$\begin{array} { | l | l | } \hline \text { Sales } & \$ 500,000 \\\hline \text { Selling price } & \$ 5 \text { per unit } \\\hline \text { Variable expenses } & \$ 300,000 \\\hline \text { Fixed expenses } & \$ 150,000 \\\hline\end{array}$$ The sales manager argues that the unit selling price could be increased by 20%, with an expected volume decrease of only 10%. If Kern incorporates these changes in its budget, what should be the budgeted net income?

• A)$66,000.
• B)$120,000.
• C)$90,000.
• D)$145,000.

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Definitions:

Predict Movements

The activity of forecasting the future changes or directions of variables such as prices, trends, or behaviors.

Market Economy

An economic system in which supply and demand from consumers drive the production of goods and services.

Trade-Offs

Refers to the concept of giving up one thing in return for gaining another, often used in decision making where resources are scarce.

Allocate Time

The process of deciding how to distribute one's available time across various tasks or activities.