Question

Avery Company prepared the following budgeted income statement for the first quarter of 2018 (Click the icon to view the budgeted income statement) Avery Company is considering two options (Click the icon to view the options.) Read the requirements Requil calcul les remain $25,000. Round all Data Table Begin 1 More Info Sales Option 1 is to increase advertising by 51.200 per month Option 2 is to use better quality materials in the manufacturing process. The better materials will increase the cost of goods sold to 25% but will provide a better product at the same sales price. The marketing manager projects either option will result in sales increases of 25% per month rather than 20% Net Sales Reven Cost of Goods sa Gross Profit S and A Expense Operating Income Costa Gross S and Opera Incom Print Done Income Tax Expel Not in $ 11,200 $ 13,920 S 17.184 S 42,304 Net Income Enter Print Done

Answer 1

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Requirment 1	Option 1
		January	February	March	Total
Sales Revenue	25% Increase	$ 25,000	$     31,250	$   39,063	$   95,313
Less: Cost of Goods Sold	20% of Sales	$     5,000	$       6,250	$     7,813	$   19,063
Gross Margin		$ 20,000	$     25,000	$   31,250	$   76,250
S & A Expense	$3,000+$1,200+12% of sale	$     7,200	$       7,950	$     8,888	$   24,038
Operating Income		$ 12,800	$     17,050	$   22,363	$   52,213
Income Tax Expense	20% of Operating Income	$     2,560	$       3,410	$     4,473	$   10,443
Net Income		$ 10,240	$     13,640	$   17,890	$   41,770
Requirment 1	Option 2
		January	February	March	Total
Sales Revenue	25% Increase	$ 25,000	$     31,250	$   39,063	$   95,313
Less: Cost of Goods Sold	25% of Sales	$     6,250	$       7,813	$     9,766	$   23,828
Gross Margin		$ 18,750	$     23,438	$   29,297	$   71,484
S & A Expense	$3,000+12% of sale	$     6,000	$       6,750	$     7,688	$   20,438
Operating Income		$ 12,750	$     16,688	$   21,609	$   51,047
Income Tax Expense	20% of Operating Income	$     2,550	$       3,338	$     4,322	$   10,209
Net Income		$ 10,200	$     13,350	$   17,288	$   40,838
Requirment 2
Option 1
Lower
Not to opt for any option