20.7

Merline Manufacturing makes its product for $70 per unit and sells it for $132 per unit. The sales staff recelves a 10% commisslon on the sale of each unit. Its December Income statement follows. Management expects December's results to be repeated In January, February, and March of 2020 without any changes in strategy. Management, however, has an alternatlve plan. It belleves 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 $117 per unit and advertising expenses are Increased by 15% and remain at that level for all three months. The cost of its product will remain at $70 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? 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.) \begin{tabular}{|l|c|c|c|} \hline \multicolumn{3}{|c|}{ MERLINE MANUFACTURING } \\ \hline \multicolumn{3}{|c|}{ Budgeted Sales } \\ \hline For Months of January, February, and March, 2020 \\ \hline & January & February & March \\ \hline Budgeted sales (in dollars) & & & \\ \hline & & & \\ \hline & & & \\ \hline \end{tabular} Is net income for March expected to increase with the proposed strategy changes