Question

UIZ Merline Manufacturing makes its product for $70 per unit and sells it for $134 per unit. The sales staff receives a 10% commission of the sale of each unit. Its December income statement follows. 51.300,00 ERLINE MANUFACTURDI Income Statement For Month Ended December 31, 2017 Sales Cost of goods sold Gross profit Operating expenses Sales commissions (10) Advertising Store rent Administrative salaries Depreciation office equipment Other expenses Total expenses Net income Management expects December's results to be repeated in January February, and March of 2018 without any changes in strategy Management, however, has an alternative plan. It believes that unit sales will increase at a rate of 10% each month for the next three months (beginning with January if the item's selling price is reduced to $119 per unit and advertising expenses are increased by 25% and remain at that level for all three months. The cost of its product will remain at 570 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the same Required: Prepare budgeted income statements for each of the months of January February, and March that show the expected results from implementing the proposed changes (Enter your final answers in whole dollars.) MERLINE MANUFACTURING Budgeted Sales For Months of January, February, and March, 2018 January February Prey 17 of 30 # Next >

Answer 1

MERLINE MANUFACTURING Budgeted Sales For Month of January, February and March 2016 January February Budgeted Sales (in Units) 11000 12100 Budgeted Selling Price per Unit 119 119 Budgeted Sales (in Dollars) 1309000 1439900 March 13310 119 1583 890 Calculation: Current Unit Sales = 1,340,000 / 134 = 10,000 Units January Expected Sales = 10,000 * 1.10 = 11,000 Units February Expected Sales = 11,000 * 1.10 = 12,100 Units March Expected Sales = 12,100 * 1.10 = 13,310 Units

Sales March 1583890 931700 652190 MERLINE MANUFACTURING Budgeted Income Statement For Month of January, February and March 2016 January February 1309000 1439900 Cost of Goods Sold @ $ 70 per Unit 770000 847000 Gross Profit 539000 592900 Expenses: Sales Commission 130900 143990 Advertising 260000 260000 Store Rent 24400 24400 Administrative Salaries 42000 42000 Depreciation - Office Equipment 52000 52000 Other Expenses 12400 12400 Total Expenses 521700 534790 Net Income 17300 58110 158389 260000 24400 42000 52000 12400 549189 103001 Advertising = $208,000 * 1.25 = $260,000