Question

[The following information applies to the questions displayed below.]

Gulf States Manufacturing has the following data from year 1 operations, which are to be used for developing year 2 budget estimates:

Sales revenues (21,500 units)	$	1,935,000
Manufacturing costs
Materials	$	345,000
Variable cash costs		471,000
Fixed cash costs		189,000
Depreciation (fixed)		233,000
Marketing and administrative costs
Marketing (variable, cash)		244,000
Marketing depreciation		59,000
Administrative (fixed, cash)		236,000
Administrative depreciation	$	21,000
Total costs	$	1,798,000
Operating profits	$	137,000

All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $15,450 will be replaced in year 2 with new equipment that will incur an annual depreciation charge of $21,900. Sales volume and prices are expected to increase by 10 percent and 6 percent, respectively. On a per-unit basis, expectations are that materials costs will increase by 8 percent and variable manufacturing costs will decrease by 2 percent. Fixed cash manufacturing costs are expected to decrease by 6 percent.

Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 6 percent. Inventories are kept at zero. Gulf States operates on a cash basis.

1.

value:
10.00 points

Required information

Required:

Prepare a budgeted income statement for year 2. (Do not round intermediate calculations.)

Answer 1