6-33 Budgeted income statement. (CMA, adapted) Smart Video Company is a manufacturer of videoconferencing products. Maintaining the videoconferencing equipment is an important area of customer satisfaction. A recent downturn in the computer industry has caused the videoconferencing equipment segment to suffer, leading to a decline in Smart Video?s financial performance. The following income statement shows results for 2014:

?Chart in book?

Smart Video?s management team is preparing the 2015 budget and is studying the following information:

• 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 2014.

• Equipment sales in units are expected to increase by 6%, with a corresponding 6% growth in units of maintenance contracts.
• Cost of each unit sold is expected to increase by 5% to pay for the necessary technology and quality improvements.
• Marketing costs are expected to increase by $290,000, but administration costs are expected to remain at 2014 levels.
• Distribution costs vary in proportion to the number of units of equipment sold.
• Two maintenance technicians are to be hired at a total cost of $160,000, which covers wages and related travel costs. The objective is to improve customer service and shorten response time.
• There is no beginning or ending inventory of equipment.