Question

The following information is available for year 1 for Dancer Components:

Sales revenue (220,000 units)	$	6,160,000
Manufacturing cost
Materials	$	363,000
Variable cash cost		308,000
Fixed cash cost		708,000
Depreciation (fixed)		2,159,000
Marketing and administrative costs
Marketing (variable, cash)		913,000
Marketing depreciation		323,000
Administrative (fixed, cash)		1,099,000
Administrative depreciation		161,000
Total costs	$	6,034,000
Operating profit	$	126,000

Variable marketing costs to change with unit volume. Administrative cash cost is expected to increase by 3 percent. Inventories will be kept at zero. Dancer Components operates on a cash basis.

Every depreciation charge is fixed and they are expected to remain the same for year 2. Sales volume will be expected to fall by 3 percent, however prices are expected to rise by 13 percent. The material costs per unit are expected to increase by 10 percent. All other unit variable manufacturing costs are expected to decrease by 7 percent per unit. Fixed cash costs are expected to increase by 2 percent.

Prepare a budgeted income statement for year 2.

Answer 1

Calculation of showing per unit cost of variable components -

Preparation of Budgeted Income statement for Year 2 -

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