Budgeted gross profit is $490,460, selling and administrative expenses are $228,100 and the tax rate is 25%. What are budgeted income taxes?

1. Tax is charged on income before taxes, not on gross profit. 2. Income before taxes is $490,460 minus $228,100, which is $262,360. 3. Income taxes are 25% of $262,360, which is $65,590. 4. Net income is then $262,360 minus $65,590, which is $196,770. 5. $122,615 taxes gross profit and ignores operating expenses entirely. 6. $57,025 taxes the selling and administrative expenses, which is not an income figure. 7. $52,472 applies a 20% rate to the right income figure, and 20% is the rate used by the other company in this comparison. _Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 7.9 Budgeted Income Statement_