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officers, the company gives divisional management a bonus equal to 15 percent of the excess of actual net income over budgeted net income. The following is Atlantic Division's current year's performance. Current Year $1,000,000 625,000 375,000 225,000 Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income $ 150,000 The president has just received next year's budget proposal from the vice president in charge of Atlantic Division. The proposal budgets a 5 percent increase in sales revenue with an extensive explanation about stiff market competition. The president is puzzled. Atlantic has enjoyed revenue growth of around 10 percent for each of the past five years. The president had consistently approved the division's budget proposals based on 5 percent growth in the past. This time, the president wants to show that he is not a fool. "I will impose a 15 percent revenue increase to teach them a lesson!" the president says to himself smugly. Assume that cost of goods sold and selling and administrative expenses remain stable in proportion to sales. Required a. Prepare the budgeted income statement based on Atlantic Division's proposal of a 5 percent increase. b-1. Prepare income statement with 10 percent growth. b-2. If growth is actually 10 percent as usual, how much bonus would Atlantic Division's executive officers receive if the president had approved the division's proposal? c. Prepare the budgeted income statement based on the 15 percent increase the president imposed.

officers, the company gives divisional management a bonus equal to 15 percent of the excess of actual net income over budgeted net income. The following is Atlantic Division's current year's performance. Current Year $1,000,000 625,000 375,000 225,000 Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income $ 150,000 The president has just received next year's budget proposal from the vice president in charge of Atlantic Division. The proposal budgets a 5 percent increase in sales revenue with an extensive explanation about stiff market competition. The president is puzzled. Atlantic has enjoyed revenue growth of around 10 percent for each of the past five years. The president had consistently approved the division's budget proposals based on 5 percent growth in the past. This time, the president wants to show that he is not a fool. "I will impose a 15 percent revenue increase to teach them a lesson!" the president says to himself smugly. Assume that cost of goods sold and selling and administrative expenses remain stable in proportion to sales. Required a. Prepare the budgeted income statement based on Atlantic Division's proposal of a 5 percent increase. b-1. Prepare income statement with 10 percent growth. b-2. If growth is actually 10 percent as usual, how much bonus would Atlantic Division's executive officers receive if the president had approved the division's proposal? c. Prepare the budgeted income statement based on the 15 percent increase the president imposed.

Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter14: Decentralized Operations
Section: Chapter Questions
Problem 14.9E: Profit center responsibility reporting On-Demand Sports Co. operates two divisions—the Action Sports...
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AMnerst CorpolatioIT TIaS tiimee uivisionS, eacii opelating as dTesponSIDIity cenIlei, 10 proViue dii imcentive ioi uIVISIOndi execulive officers, the company gives divisional management a bonus equal to 15 percent of the excess of actual net income over budgeted net income. The following is Atlantic Division's current year's performance. Current Year $1,000,000 625,000 375,000 225,000 Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income $ 150,000 The president has just received next year's budget proposal from the vice president in charge of Atlantic Division. The proposal budgets a 5 percent increase in sales revenue with an extensive explanation about stiff market competition. The president is puzzled. Atlantic has enjoyed revenue growth of around 10 percent for each of the past five years. The president had consistently approved the division's budget proposals based on 5 percent growth in the past. This time, the president wants to show that he is not a fool. "I will impose a 15 percent revenue increase to teach them a lesson!" the president says to himself smugly. Assume that cost of goods sold and selling and administrative expenses remain stable in proportion to sales. Required a. Prepare the budgeted income statement based on Atlantic Division's proposal of a 5 percent increase. b-1. Prepare income statement with 10 percent growth. b-2. If growth is actually 10 percent as usual, how much bonus would Atlantic Division's executive officers receive if the president had approved the division's proposal? c. Prepare the budgeted income statement based on the 15 percent increase the president imposed. d. If the actual results turn out to be a 10 percent increase as usual, how much bonus would Atlantic Division's executive officers receive since the president imposed a 15 percent increase? Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req C and D Prepare the budgeted income statement based on Atlantic Division's proposal of a 5 percent increase. AMHERST CORPORATION Budgeted Income Statement Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income $ Req A Req B1 >
Transcribed Image Text:AMnerst CorpolatioIT TIaS tiimee uivisionS, eacii opelating as dTesponSIDIity cenIlei, 10 proViue dii imcentive ioi uIVISIOndi execulive officers, the company gives divisional management a bonus equal to 15 percent of the excess of actual net income over budgeted net income. The following is Atlantic Division's current year's performance. Current Year $1,000,000 625,000 375,000 225,000 Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income $ 150,000 The president has just received next year's budget proposal from the vice president in charge of Atlantic Division. The proposal budgets a 5 percent increase in sales revenue with an extensive explanation about stiff market competition. The president is puzzled. Atlantic has enjoyed revenue growth of around 10 percent for each of the past five years. The president had consistently approved the division's budget proposals based on 5 percent growth in the past. This time, the president wants to show that he is not a fool. "I will impose a 15 percent revenue increase to teach them a lesson!" the president says to himself smugly. Assume that cost of goods sold and selling and administrative expenses remain stable in proportion to sales. Required a. Prepare the budgeted income statement based on Atlantic Division's proposal of a 5 percent increase. b-1. Prepare income statement with 10 percent growth. b-2. If growth is actually 10 percent as usual, how much bonus would Atlantic Division's executive officers receive if the president had approved the division's proposal? c. Prepare the budgeted income statement based on the 15 percent increase the president imposed. d. If the actual results turn out to be a 10 percent increase as usual, how much bonus would Atlantic Division's executive officers receive since the president imposed a 15 percent increase? Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req C and D Prepare the budgeted income statement based on Atlantic Division's proposal of a 5 percent increase. AMHERST CORPORATION Budgeted Income Statement Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income $ Req A Req B1 >
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