Kern Company Prepared the Following Tentative Budget for Next Year

question 296

Multiple Choice

Kern Company prepared the following tentative budget for next year:
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 operating income?

• A) $66,000.
• B) $90,000.
• C) $120,000.
• D) $145,000.Budgeted operating income = 90,000 * $3 - 150,000 = $120,000.

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Definitions:

Net Operating Income

A measure of a company's profitability from its ordinary, core operations, excluding expenses and incomes from financing and investing activities.

Investment

The allocation of resources, such as capital or time, in the expectation of generating an income or profit.

Division Manager

An individual responsible for overseeing the operations, performance, and strategies of a specific division within a company.

Return on Investment

A financial metric used to evaluate the efficiency or profitability of an investment, expressed as a percentage of the investment's net profit to its cost.