=+10-31 KK Budgeted income statement (CMA, adapted) OBJECTIVE 3 EasiCom Ltd is a manufacturer of video-conferencing products. Regular units are manufactured to meet marketing projections, and specialised units are made after an order is received. Maintaining the video-conferencing equipment is an important area of customer satisfaction. With the recent downturn in the computer industry, the video-conferencing equipment segment has suffered, leading to a decline in EasiCom Ltd’s financial performance. The following income statement shows results for 2015:

408 Chapter 10: Master budget and responsibility accounting M10_HORN3377_02_LT_C10.indd 408 2/09/13 3:46 PM EasiCom Ltd Income statement for the year ended 31 December 2015 (in thousands)

Revenues:

Equipment $6000 Maintenance contracts 1800 Total revenues $7800 Cost of goods sold 4600 Gross margin 3200 Operating costs Marketing 600 Distribution 150 Customer maintenance 1000 Administration 900 Total operating costs 2650 Operating income $550 EasiCom Ltd’s management team is in the process of preparing the 2016 budget and is studying the following information:

1 Selling prices of equipment are expected to increase by 10% as the economic recovery begins. The selling price of each maintenance contract is expected to remain unchanged from 2015.