Adjustments for the change in inventory and for income taxes have not been made. The scheduled production for this year is 420,000 units, and planned sales volume is 380,000 units. Sales and production volume was 280,000 units last year. The company uses a full-absorption costing and FIFO inventory system and is subject to a 40 percent income tax rate.

$ 2,180,000 174,000 190,000 Statement of Income and Retained Earnings For the Budget Year Ended December 31, Year 1 Revenues Sales revenue $ 2.100.000 Other income 80,000 Expenses Cost of goods sold Materials $ 638,000 Direct labor 660,000 Variable overhead 324,000 Fixed overhead 58,000 $ 1.680,000 Beginning inventory 336.000 $ 2,016,000 Ending inventory 336.000 S 1,680,000 Selling Salaries $ 64.000 Commissions 70,000 Promotion and 136,000 270,000 advertising General and administrative Salaries $ 66,000 Travel 14,500 Office costs 42.000 122.500 Income taxes 43,000 Operating profit Beginning retained earnings Subtotal Less dividends Ending retained earnings 210,000 103,000 380,000 729,800 2,500,000 56,000 Expected Account Balances for December 31, Year 2 Cash 5,800 Accounts receivable 330.000 Inventory (January 1, Year 2) 336,000 Plant and equipment 570,000 Accumulated depreciation $ Accounts payable Notes payable (due within one year) Accrued payables Common stock Retained earnings Sales revenue Other income Manufacturing costs Materials 915,000 Direct labor 950,000 Variable overhead 626.000 Depreciation 30,000 Other fixed overhead 41,000 Marketing Commissions 100,000 Salaries 74,000 Promotion and advertising 200,000 Administrative Salaries 74,000 Travel 15,000 Office costs 46,000 Income taxes Dividends 30,000 $ 4,342,800 $ 2,115,500 64,500 695,300 759,800 30,000 729,800 $ $ 4,342,800 Budgeted Balance Sheet Budgeted December 31, Year 2 Current assets Cash Accounts receivable Inventory Income tax receivable $ Total current assets Plant and equipment Accumulated depreciation Total assets $ A Current liabilities Accounts payable Accrued payable Notes payable $ Total current liabilities Shareholders' equity Common stock Retained earnings Total shareholders' equity Total liabilities and shareholders' equity $