Estimated Income Statement. Ridgway Appliances, Inc. prepared a budget for 1998 by quarters. Budget data appear as follows:

Ridgway is trying to reduce inventories. Direct labor is budgeted at $140,000 each quarter with factory overhead estimated at 200 percent of direct labor costs.
Selling and general expenses are budgeted at $115,000 each quarter. The amount of finished goods is estimated to be $140,000 at the beginning of the year. Finished goods inventory is to be decreased by $10,000 per quarter.
Required:
1. Prepare an estimated income statement for each quarter and for the year.
Income tax is estimated at 40 percent of income before income tax.
2. If the inventory reductions did not occur and other given amounts remain the same, what changes might you see in 1998 operating results?

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Budgeted Sales Materials Purchases Beginning Materials Inventory First quarter $860,000 $ 280,000 Second quarter... 940,000 Third quarter.. 990,000 Fourth quarter First quarter, 1999. 960,000 - $75,000 360,000 65,000 400,000 50,000 300,000 45,000 40,000