Preparing the Budgeted Income Statement

Sales $8,850,000

Cost of goods sold 4,318,800

Gross Margin $4,531,200

Operating expenses:

Variable $708,000

Fixed $1,400,000 2,108,000

Net income before

taxes and interest $2,423,200

Interest1 528,060

1,895,140

Taxes @ 40% 758,056

Net Income $1,137,084

1Interest expense derived from cash budget