Santana Rey expects second quarter 2022 net income of Business Solutions’s line of computer furniture to be the same as the first quarter’s net income (reported below) without any changes in strategy. Sales were 120 desk units (sales price of $1,250) and 60 chairs (sales price of $500).

Santana believes that sales will total 156 desks and 105 chairs for the next quarter if selling prices are reduced to $1,150 for desks and $450 for chairs and advertising expenses are increased to $12,000 for the quarter. Product costs per unit and amounts of all other expenses will not change.

Required

1. Prepare a budgeted income statement for the computer furniture segment for the quarter ended June 30, 2022, that shows the results from implementing the proposed changes.

2. Do the proposed changes increase or decrease budgeted net income for the quarter?

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BUSINESS SOLUTIONS-Computer Furniture Segment Segment Income Statement For Quarter Ended March 31, 2022 Salest ... $180,000 Cost of goods sold Gross profit .. 105,000 75,000 Selling, general, and administrative expenses Sales commissions (10%). Advertising expenses.... General and administrative expenses.... Net income . $18,000 9,000 18,000 45,000 $ 30,000 *Reflects activity only related to the computer furniture segment. * Sales: (120 desks x $1,250) + (60 chairs x $500) = $180,000. *Cost of goods sold: (120 desks x $750) + (60 chairs x $250) = $105,000.