Question

Sales BUSTNESS SOLUTIONS Computer Furniture Segment Segment Income Statement For Quarter Ended March 31, 2018 $216,600 Cost of goods sold' 141,700 Gross profit 74,900 Expenses Sales commissions (10%) 21,660 Advertising expenses 10.800 Other fixed expenses 19,800 Total expenses 52,260 Net income $ 22,640 * Reflects revenue and expense activity only related to the computer furniture segment. Revenue: (132 desks * $1,310) + 78 chairs $560) = $172,920+ $43,680 = $216,600 1 Cost of goods sold: (132 desks * $810) + (78 chairs * $310) + $31,800 - $141,700 Santana Rey believes that sales will increase each month for the next three months (April, 52 desks, 38 chairs: May, 56 desks, 41 chairs; June, 60 desks, 44 chairs) if selling prices are reduced to $1,210 for desks and $510 for chairs, and advertising expenses are increased by 10% and remain at that level for all three months. The products' variable cost will remain at $810 for desks and $310 for chairs. The sales staff will continue to earn a 10% commission, the fixed manufacturing costs per month will remain at $10,600 and other fiveri aynences will remain at $6.600 ner month Prey 1 of 1 !!! Next > Report (3) (1).docx - DOô Report (3).docx e a 0 0 9

Answer 1

1.

BUSINESS SOLUTIONS-COMPUTER FURNITURE SEGMENT Budgeted Income Statements For The Months of April, May, and June
	April	May	June
Sales	$82,300 (52*$1210+38*$510)	$88,670 (56*$1210+41*$510)	$95,040 (60*$1210+44*$510)
Cost of goods sold	64,500 (52*$810+38*$310+10,600)	68,670 (56*$810+41*$310+10,600)	72,840 (60*$810+44*$310+10,600)
Gross profit	17,800	20,000	22,200
Expenses:
Sales commission 10%	8,230	8,867	9,504
Advertising (10,800+10%)/3	3,960	3,960	3,960
Other fixed expenses	6,600	6,600	6,600
Total expenses	18,790	19,427	20,064
Net income (loss)	$(990)	$573	$2,136

2.

As per the above results, Santana Rey should not implement the proposed changes.