Answer the Following Questions Using the Information Below:
Sherry and John

Multiple Choice

Answer the following questions using the information below:
Sherry and John Enterprises are using the kaizen approach to budgeting for 2015. The budgeted income statement for January 2015 is as follows:
$$\begin{array} { l r } \text { Sales ( } 168,000 \text { units) } & \$ 1,000,000 \\\text { Less: Cost of goods sold } & 600,000 \\\text { Gross margin } & 400,000 \\\text { Operating expenses } & 300,000 \\\text { (includes } \$ 50,000 \text { of fixed costs) } & \\\text { Operating income } & \$ 100,000 \\\hline\end{array}$$ Under the kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 1% per month.
-What is the budgeted operating income for February 2015?

A) $206,000
B) $297,500
C) $116,915
D) $594,000