For Month Ended December 31, 2013
Sales $ 1,380,000
Cost of goods sold 700,000
Gross profit 680,000
Sales commissions (10%) 138,000
Store rent 24,800
Administrative salaries 44,000
Other expenses 12,800
Total expenses 489,600
Net income $ 190,400
Management expects December’s results to be repeated in January, February, and March of 2014 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 $123 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 $70 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.
These solutions may offer step-by-step problem-solving explanations or good writing examples that include modern styles of formatting and construction of bibliographies out of text citations and references. Students may use these solutions for personal skill-building and practice. Unethical use is strictly forbidden.MERLINE COMPANY
For the months ended January 31, February 28, and March 31, 2014
January February March
Budgeted Sales 1,353,000.00 1,488,300.00 1,637,130.00...
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