RingTone Pty Ltd produces phones. The company prepared the following budgeted income statement:

Sales Cost of sales				$	2560000 1028000
Gross profit Expenses					1532000
Selling expenses Administrative expenses	$	260000 110000			370000
Profit				$	1162000

The owner, Rhing Thonn, wants to use this income statement as the basis of projecting the profits for the forthcoming year. He needs to know what the projected profit will be if the unit sales of phones increase by 20%. The following relevant information is available:

Selling price per phone Variable manufacturing costs per phone Annual fixed manufacturing costs Percentage of selling expenses that are variable Annual fixed administrative expenses

$320 $96 $260000 20% $120000

Required

A. Restructure the previous year’s income statement to present it in contribution margin format.

B. What is the contribution margin for each phone?

C. Assuming the selling price and all costs remain unchanged, what will be the projected profit for the forthcoming year?