20-3A Manufacturing: Preparation and analysis of budgeted income statements LO P3 Merline Manufacturing makes its product for $50 per unit and sells it for $150 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows. MERLINE MANUFACTURING Income Statement For Month Ended December 31, 2019 Sales Cost of goods sold Gross profit Operating expenses Sales commissions (10%) $1,500,000 500,000 1,000,000 150,000 Advertising Store rent Administrative salaries Depreciation-office equipment Other expenses Total expenses Net income 240,000 26,000 50,000 60,000 14,000 540,000 $ 460,000 Management expects December's results to be repeated in January, February, and March of 2020 without any changes in strategy. Management, however, has an alternative plan. It believes that unit sales will increase at a rate of 10% each month for the next three months (beginning with January) if the item's selling price is reduced to $135 per unit and advertising expenses are increased by 25% and remain at that level for all three months. The cost of its product will remain at $50 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the same. Required: 1. Prepare budgeted income statements for each of the months of January, February, and March that show the expected results from implementing the proposed changes. 2. Is net income for March expected to increase with the proposed strategy changes? Complete this question by entering your answers in the tabs below. Required 1 Required 2 for ach of the months of sherian and March that chow the und alte Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare budgeted income statements for each of the months of January, February, and March that show the expected results from implementing the proposed changes. (Enter your final answers in whole dollars.) MERLINE MANUFACTURING Budgeted Sales For Months of January, February, and March, 2020 Budgeted sales (in dollars) Expenses January February March MERLINE MANUFACTURING Budgeted Income Statement For Months of January, February, and March, 2020 Sales commissions. Advertising Store rent Administrative salaries Depreciation-Office equipment Other expenses Total expenses January February March 1 Depreciation-office equipment Other expenses Total expenses Net income 60,000 14,000 540,000 $ 460,000 Management expects December's results to be repeated in January, February, and March of 2020 without any changes in strategy Management, however, has an alternative plan. It believes that unit sales will increase at a rate of 10% each month for the next thre months (beginning with January) if the item's selling price is reduced to $135 per unit and advertising expenses are increased by 2 and remain at that level for all three months. The cost of its product will remain at $50 per unit, the sales staff will continue to earne 10% commission, and the remaining expenses will stay the same. Required: 1. Prepare budgeted income statements for each of the months of January, February, and March that show the expected results fm implementing the proposed changes. 2. Is net income for March expected to increase with the proposed strategy changes? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Is net income for March expected to increase with the proposed strategy changes? Is net income for March expected to increase with the proposed strategy changes? < Required 1 Required 2 >