Prepare Budgeted Financial Statements: Monumental Designs has the following data from Year 1 operations, which are to be used for developing Year 2 budget estimates:

Depreciation charges are all fixed. Old manufacturing equipment with an annual depreciation charge of $9,700 will be replaced in Year 2 with new equipment that will incur an annual depreciation charge of $14,000. Sales volume is expected to increase by 12 percent, and prices are expected to increase by 6 percent. Materials costs are expected to increase by 10 percent for each unit produced. Variable manufacturing costs are expected to decrease by 4 percent on a per unit basis. Fixed manufacturing costs are expected to decrease by 7 percent. Variable marketing costs will change with volume. Administrative costs are expected to increase by 8 percent. Inventories are kept at close to zero.

Required: Prepare a budgeted income statement for Year 2.

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Revenues (100,000) Manufacturing costs: Materials $746,000 133,000 Variable cash costs 180,900 Fixed cash costs 72,000 Depreciation (fixed) 89,000 Marketing and administrative costs: Marketing (variable, cash) 95,000 Marketing depreciation 22,600 Administrative (fixed, cash) Administrative depreciation Total costs Operating profits 90,110 8,400 691,010 $ 54,990