Delft House, Inc., a multinational company based in Amsterdam, organizes and coordinates art shows and auctions throughout the world. Its budgeted and actual costs for last year are as follows:

Delft House, Inc., has budgeted the following fixed costs for the coming year: executive salaries, €440,000; advertising expense, €190,000; merchandise insurance, €80,000; and liability insurance, €68,000. Additional information pertaining to the operations of Delft House, Inc., in the coming years is as follows:
a. Net receipts are estimated at €6,400,000.
b. Salaries expense for staging will increase 20 percent over the actual figures for the last year.
c. Travel costs are expected to be 11 percent of net receipts.
d. Auctioneer services will be billed at 9.5 percent of net receipts.
e. Space rental costs will be 20 percent higher than the amount budgeted in the last year.
f. Printing costs are expected to be €190,000.
g. Home office costs are budgeted for €230,000.
h. Shipping costs are expected to be 20 percent higher than the amount budgeted in the last year.
i. Miscellaneous expenses for the coming year will be budgeted at €28,000.
Because the company sells only services, it has expenses only and no cost of sales. (Net receipts equal gross margin.)
1. Using a 40 percent income tax rate, prepare the company's budgeted income statement for the coming year.
2. Should the budget committee be worried about the trend in the company's operations? Explain your answer.

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Budgeted Cost Actual Cost Salaries expensc, staging Salaries expcnsc, exccutive Travel costs Auctioncer scrviccs Space rental costs Printing costs Advertising expensc Insurance, merchandisc Insurance, liability Homc office costs Shipping costs Miscellanco Total opcrating expenses Nct reccipts 480,000 380,000 640,000 540,000 251,000 192,000 169,000 84,800 64,000 209,200 105,000 25,000 3,140,000 6,200,000 512,800 447,200 652,020 449,820 246,580 182,500 183,280 77,300 67,100 219,880 112,560 25,828 3,176,868 6,369,200 us