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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 $130 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 $50 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 Budgeted sales (in units) Budgeted selling price per unit Budgeted sales (in dollars) Sales Cost of goods sold Gross profit Expenses Sales commissions Advertising Store rent Administrative salaries Depreciation Office equipment Other expenses Total expenses Net income MERLINE MANUFACTURING Budgeted Income Statement For Months of January, February, and March, 2018 January February March $ 0 0 $ 0 0 $ March 0 0

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 $130 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 $50 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 Budgeted sales (in units) Budgeted selling price per unit Budgeted sales (in dollars) Sales Cost of goods sold Gross profit Expenses Sales commissions Advertising Store rent Administrative salaries Depreciation Office equipment Other expenses Total expenses Net income MERLINE MANUFACTURING Budgeted Income Statement For Months of January, February, and March, 2018 January February March $ 0 0 $ 0 0 $ March 0 0

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 $130 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 $50 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.) Budgeted sales (in units) Budgeted selling price per unit Budgeted sales (in dollars) For Months of January, February, and March, 2018 January February Expenses MERLINE MANUFACTURING Budgeted Sales Sales Cost of goods sold Gross profit Total expenses Net income Sales commissions Advertising Store rent Administrative salaries Depreciation Office equipment Other expenses MERLINE MANUFACTURING Budgeted Income Statement For Months of January, February, and March, 2018 January February March $ 0 0 $ 0 0 $ March 0 0
Transcribed Image Text: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 $130 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 $50 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.) Budgeted sales (in units) Budgeted selling price per unit Budgeted sales (in dollars) For Months of January, February, and March, 2018 January February Expenses MERLINE MANUFACTURING Budgeted Sales Sales Cost of goods sold Gross profit Total expenses Net income Sales commissions Advertising Store rent Administrative salaries Depreciation Office equipment Other expenses MERLINE MANUFACTURING Budgeted Income Statement For Months of January, February, and March, 2018 January February March $ 0 0 $ 0 0 $ March 0 0
Merline Manufacturing makes its product for $50 per unit and sells it for $145 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows. MERLINE MANUFACTURING 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 $1,450,000 500,000 950,000 145,000 230,000 25,500 47,500 57,500 13,500 519,000 $ 431,000 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 $130 per unit and advertising expenses are increased by 25%
Transcribed Image Text:Merline Manufacturing makes its product for $50 per unit and sells it for $145 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows. MERLINE MANUFACTURING 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 $1,450,000 500,000 950,000 145,000 230,000 25,500 47,500 57,500 13,500 519,000 $ 431,000 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 $130 per unit and advertising expenses are increased by 25%
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