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

All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $29,100 will be replaced in year 2 with new equipment that will incur an annual depreciation charge of $42,000. Sales volume and prices are expected to increase by 8 percent and 3 percent, respectively. On a per-unit basis, expectations are that materials costs will increase by 6 percent and variable manufacturing costs will decrease by 5 percent. Fixed cash manufacturing costs are expected to decrease by 9 percent.

Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 10 percent. Inventories are kept at zero. Gulf States operates on a cash basis.

Required

Prepare a budgeted income statement for year 2.

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Manufacturing costs 545,000 216,000 267,000 Fixed cash costs Marketing and administrative costs 285,000 67,800 270,300 25,200 Marketing (variable, cash) . . .