Topper Sports, Inc., produces high-quality sports equipment. The company's Racket Division manufactures three tennis rackets-the Standard, the Deluxe, and the Pro-that are widely used in amateur play. Selected information on the rackets is given below: Standard Deluxe Pro $ 45.00 $ 70.00 Selling price per racket Variable expenses per racket: $100.00 $ 35.00 $ 27.00 $ 2.25 $ 3.50 $ 36.00 $ 5.00 Production Selling (5% of selling price) All sales are made through the company's own retail outlets. The Racket Division has the following fixed costs: Per Month $ 138,000 Fixed production costs Advertising expense Administrative salaries 118,000 68,000 $ 324,000 Total Sales, in units, over the past two months have been as follows: Standard Deluxe Pro Total April May 2,000 1,000 5,000 8,000 1,000 3,000 12,000 8,000
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Assume that sales of the Standard racket increase by $21,800. What would be the effect on net operating income? What would be the effect if Pro racket sales increased by $21,800? Do not prepare income statements; use the incremental analysis approach in determining your answer.
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