Plenair, Inc., is located in France and organizes and coordinates art shows and auctions throughout the world. Its budgeted and actual costs for last year follow. ? Because the company sells only services, there is no cost of goods sold (net receipts equal gross margin). Plenair has budgeted the following fixed costs for the coming year: salaries, €1,000,000; advertising expense, €190,000; insurance, €150,000; and space rental costs, €300,000. Additional information: a. Net receipts are estimated at €6,400,000. b. Travel costs are expected to be 11 percent of net receipts. c. Auctioneer services will be billed at 15 percent of net receipts. d. Printing costs are expected to be €190,000. e. Home office costs are budgeted for €30,000. f. Shipping costs are expected to be 20 percent higher than the €105,000 budgeted in the last year. g. Miscellaneous expenses for the coming year will be budgeted at €8,000. 1. Prepare the company’s budgeted income statement for the coming year using a 40 percent income tax rate, 2. Should the budget committee be worried about the trend in the company’s operations? Explain youranswer.
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