Question

The following information is available for year 1 for Pepper Products: $3,510,000 $ 208,000 177,000 408,000 1,244,000 Sales revenue (130,000 units) Manufacturing costs Materials Variable cash costs Fixed cash costs Depreciation (fixed) Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation Total costs Operating profits 525,000 186,000 633,000 94,000 $3,475,000 35,000 All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to fall by 6 percent, but prices are expected to rise by 15 percent. Material costs per unit are expected to increase by 9 percent. Other unit variable manufacturing costs are expected to decrease by 7 percent per unit. Fixed cash costs are expected to increase by 5 percent. Variable marketing costs will change with unit volume. Administrative cash costs are expected to increase by 4 percent. Inventories are kept at zero. Pepper Products operates on a cash basis. Required: Prepare a budgeted income statement for year 2. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amounts.) PEPPER PRODUCTS Budgeted Income Statement For Year 2

Answer 1

PEPPER PRODUCTS
Budgeted Income Statement
For Year 2
Sales Revenue	3794310	(3510000/130000) * 115%*130000*94%
Manufacturing Costs
Materials	226720	208000*109%
Depreciation (Fixed)	1244000
Fixed Cash Costs	428400	408000*105%
Other Variable Costs	164610	177000*93%
Total Manufacturing Costs	2063730
Marketing and Administrative Costs
Marketing (Variable, Cash)	493500	525000*94%
Marketing Depreciation	186000
Administrative (Fixed, Cash)	658320	633000*104%
Administrative Depreciation	94000
Total Marketing and Administrative Costs	1431820
Total Costs	3495550
Operating Profit	298760