Question

Just do part 1 June

The chapter 22 team discussion problem is presented below.

• If your team has three members, complete part 1 only; each team member should prepare a budgeted income statement for a different month (April, May, or June).
• If your team has four members, complete parts 1 and 2; the first three team members will complete part 1 (April, May, and June, respectively), and the fourth team member will complete part 2.

The problem is reproduced below.

• For full credit on part 1: present the budgeted income statement for your month neatly, and show all calculations for your Sales and Cost of Goods Sold figures.
• For full credit on part 2: your recommendation should be a professional-quality full paragraph of 3-4 sentences.

IMPORTANT INSTRUCTIONS:

1. Navigate to your Group Homepage and use your Group's Announcement tool to decide among your teammates who will work on which parts (budgeted income statements for April, May, and June in part 1, and -- if your team has a fourth member -- the recommendation letter in part 2).

2. Once your roles are agreed, post your solutions in your group's Discussion forum. Be sure to clearly label your answer, indicating which part you are answering.

3. In teams that have 4 members, note that the person who completes part 2 will need to have access to the solutions to part 1 before they can complete their recommendation. Accordingly, the deadline for completing part 2 is 24 hours after the initial submission deadline.

4. For full credit, be sure to comment constructively on your teammates' posts.

CHAPTER 22 TEAM DISCUSSION PROBLEM

Kodiak Office Furniture expects second-quarter 2020 sales of its 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 40 desk units (sales price of $1,250) and 20 chairs (sales price of $500).

Kodiak Office Furniture Income Statement For Quarter Ended March 31, 2020
Sales*	$180,000
Cost of goods sold**	115,000
Gross profit	65,000
Expenses
Sales commissions (10%)	18,000
Advertising expenses	9,000
Other fixed expenses	18,000
Total expenses	45,000
Net income	$20,000

* Revenue: (120 desks x $1,250) + (60 chairs x $500) = $150,000 + $30,000 = $180,000.

** Cost of goods sold: [variable portion = (120 desks x $750) + (60 chairs x $250)] + [fixed portion = $10,000] = $115,000.

You believe that sales will increase each month for the next three months (April, 48 desks, 32 chairs; May, 52 desks, 35 chairs; June, 56 desks, 38 chairs) if selling prices are reduced to $1,150 for desks and $450 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 $750 for desks and $250 for chairs. The sales staff will continue to earn a 10% commission, the fixed manufacturing costs will be $10,000 per month, and other fixed expenses will remain at $6,000 per month.

Required

1. Prepare budgeted income statements for each of the months of April, May, and June that show the expected results from implementing the proposed changes.

2. Use the budgeted income statements from part 1 to recommend whether Santana Rey should implement the proposed changes. Explain.