Budgeting
Budgeting
Budgeting
outlets in Jamaica. Sales in the market have been sluggish so management is talking steps
to improve profitability and utilize some idle capacity in the bakery. The management
has been introduced to Kaizen costing at a seminar given by Ministry of industry and
commerce as a means of improving the competiveness of business in the country. It was
at this seminar that the management was invited to pursue an opportunity to add a
specialty product for the hotel sector. Management believes that sales revenues will
remain unchanged for the next 2 years for the existing range of product but still would
like to increase profits. To this end they are including the budgeted value of the new
opportunity to prepare gourmet Jamaican meat pies for export. The most recent income
statement is given below before incorporating the new product.
Revenues 22,500,000
Cost of goods sold 14,625,000
Gross profit 7,875,000
Operating expenses
Quality testing and assurance 515,225
Marketing cost 1,125,380
Distributive cost 644,275
Customer service cost 343,130
Administrative cost 3,527,360
Total operating cost 6,155,370
Operating income 1,719,630
Other expenses (interest) (257,945)
Income before taxes 1,461,685
Income taxes (438,505)
Net income $1,023,180
Required
Prepare the budgeted income statement if the Kaizen costing adjustments are realized for
the next year and the new product is launched based on the sales estimates.