Question

Santana Rey expects second-quarter 2018 sales of her new line of computer furniture to be the same as the first quarter's sales (reported below) without any changes in strategy. Monthly sales averaged 44 desk units (sales price of $1320) and 27 chairs (sales price of $570) BUSINESS SOLUTIONS-Computer Furniture Segment Segment Income Statement For Quarter Ended March 31, 2018 Sales $220,410 Cost of goods solat 144,860 Gross profit 75,550 Expenses Sales Comissions (10) 22.00 Advertising expenses 11.100 Other Fixed expenses Total expenses 53,241 Net Income 22. * Reflects revenue and expense activity only related to the computer furniture segment 1 Revenue: (132 desks * $1,320) -(81 chairs S570) = $174 240 - $46,170 = $220.410 + Cost of goods sold: (132 desks $820) + (81 chairs $320) - $32100 = $144,860 Santana Rey believes that sales will increase each month for the next three months (April, 52 desks, 39 chairs, May. 56 desks, 42 chairs: June, 60 desks. 45 chairs) if selling prices are reduced to 51230 for desks and 5520 for chairs, and advertising expenses are increased by 10% and remain at that level for all three months. The products able cost w remain at 5820 for desks and $320 for chairs. The sales staff will continue to earn a 10% commission, the fixed manufacturing costs per month will remain at $10.700 and other fixed expenses will remain at 56,700 per month Required 1. Prepare budgeted Income statements for the computer furniture segment for each of the month of April May and June that show the expected results from implementing the proposed changes Use three column format with one column for each month

Answer 1

1. Budgeted Income Statement for the Furniture Segment
Particulars	April	May	June	Total
Sales	$84,240	$90,720	$97,200	$272,160
Cost of Goods Sold	$55,120	$59,360	$63,600	$178,080
Gross Profit	$29,120	$31,360	$33,600	$94,080
Expenses
Sales Commission (10% of Sales Value)	$8,424	$9,072	$9,720	$27,216
Advertising Expenses	$4,070	$4,070	$4,070	$12,210
Other Fixed Expenses	$6,700	$6,700	$6,700	$20,100
Total Expenses	$19,194	$19,842	$20,490	$59,526
Net Income	$9,926	$11,518	$13,110	$34,554
Working Notes
(1) Sales
	April	May	June
Desk Quantity	52	56	60
Desk Price	$1,230	$1,230	$1,230
Desk Sales Value(Quantity * Price)	$63,960	$68,880	$73,800
Chair Quantity	39	42	45
Chair Price	$520	$520	$520
Chair Sales Value(Quantity * Price)	$20,280	$21,840	$23,400
Total Sales	$84,240	$90,720	$97,200
(2) Cost of Goods Sold
	April	May	June
Desk Quantity	52	56	60
Desk Cost	$820	$820	$820
Desk COGS Value(Quantity * Cost)	$42,640	$45,920	$49,200
Chair Quantity	39	42	45
Chair Cost	$320	$320	$320
Chair COGS Value(Quantity * Cost)	$12,480	$13,440	$14,400
Total Cost of Goods Sold	$55,120	$59,360	$63,600
(3) Advertising Expenses
Current Advertising Expense for the Quarter		$11,100
Proposed Increase in Advertising Expense		10%
Increase in Advertising Expense		$1,110
Budgeted Advertising Expense (Existing + Proposed Increase) for the Quarter		$12,210
Monthly Advertising Expense ($ 12,210/3)		$4,070
(4) Fixed Manufacturing Costs have not been included as they remain the
same, as stated in the question, and were not considered while computing
the Net Income of the Furniture segment.