Merline Manufacturing makes its product for $65 per unit and
sells it for $143 per unit. The sales staff receives a 10%
commission on the sale of each unit. Its December income statement
For Month Ended December 31, 2017
|Cost of goods sold||650,000|
|Sales commissions (10%)||143,000|
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 $128 per unit and advertising expenses are increased by 20% and remain at that level for all three months. The cost of its product will remain at $65 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the same.
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)||(10000*1.10)=11,000||(11000*1.10) = 12,100||(12100*1.10) = 13,310|
|Budgeted selling price per unit||$128||$128||$128|
|Budgeted sales (in dollars)||1,408,000||1,548,800||1,703,680|
Budgeted Income Statement
|Cost of goods sold(units*$65)||715,000||786,500||865,150|
|Sales commissions (10% of sales)||140,800||154,880||170,368|
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