Refer to Cornerstone Exercises 2-1, 2-2, and 2-3. Next year, Sodowsky expects to produce 150,000 units and sell 140,000 units at a price of $7.50 each. Beginning inventory of finished goods is $25,000 and ending inventory of finished goods is expected to be $74,000. Total selling expense is projected at $33,000 and total administrative expense is projected at $145,000.

Required:

1. Prepare an income statement in good form. Be sure to include the percent of sales column.

2. What if the cost of goods sold percentage for the past few years was 80 percent?

Explain how management might react.

LO1