Floral Products, Inc., has the following data from Year 1 operations, which are to be used for developing Year 2 budget estimates:

All depreciation costs are fixed. Sales volume and prices are expected to increase by 12 percent and 6 percent, respectively. On a per-unit basis, expectations are that materials costs will increase by 10 percent and variable manufacturing costs will decrease by 4 percent. Fixed manufacturing costs are expected to decrease by 7 percent.
Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 8 percent.
Prepare a master budget profit plan for Year 2. Use a format similar to the one shown in Exhibit 9.7. Management wants to increase operating profits by 20 percent over Year 1€™s $54,990 expected profits. Based on your budget for Year 2, are profits expected to increase by 20 percent? Why or whynot?

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Revenues (100,000 units) Manufacturing Costs: $746,000 Materials Variable Costs Fixed Costs (excluding depreciation) Depreciation (fixed) $133,000 180,900 72,000 89,000 474,900 Marketing and Administrative Costs: Marketing (variable) Depreciation of Marketing Building and Equipment Administrative (fixed) (excluding depreciation) Depreciation of Administrative Building and Equipment $95,000 22,600 90,110 8,400 216,110 691,010 54,990 Total Costs Operating Profits