activity based budget

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 companfs nancial performance. The following income statement shows results for 2017: Videocom Company Income Statement for the Year Ended December 31. 2017 (in thousands) Revenues: Equipment 5 8.000 Maintenance contracts 1.100 Total revenues $ 9.100 Coetofgoods sold '50\" Gross margin 4.600 Operating costs Marketing 600 Distribution 170 Customer maintenance 1.900 Administration 930 Total operating costs A 3 920 Operating income management team is preparing the 2018 budget and is studying the following information: 1. 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 2017. 2. Equipment sales in units are expected to increase by 6%. with a corresponding 3% growth in units of maintenance contracts. 3. Cost of each unit sold is expected to increase by 5% to pay for the necessary technology and quality improvements. 4. Marketing costs are expected to increase by $250,000. but administration costs are expected to remain at 2017 levels. 5. Distribution costs vary in proportion to the number of units of equipment sold. 8. Two maintenance technicians are to be hired at a total cost of $130,000, which covers wages and related travel costs. The objective is to improve customer service and shorten response time. 7. There is no beginning or ending inventory of equipment. Requirements: 1. Prepare a budgeted income statement for the year ending December 31. 2018. 2. How well does the budget align with companys strategy? 3. How does preparing the budget help the company's management team better manage the company