Budgeted income statement The operating results in summarized form for a retail computer store for this year are: Revenue: Hardware sales $9,600,000 Software sales 4,000,000 Maintenance contracts 2,400,000 Total revenue $16,000,000 Costs and expenses: Cost of hardware sales $6,720,000 Cost of software sales 2,400,000 Marketing expenses 1,200,000 Customer maintenance costs 1,280,000 Administrative expenses 2,240,000 Total costs and expenses $13,840,000 Operating income $2,160,000 The computer store is in the process of formulating its operating budget for next year and has made the following assumptions: The selling prices of hardware are expected to increase 10 percent but there will be no selling price increases for software and maintenance contracts. Hardware unit sales are expected to increase 5 percent with a corresponding 5 percent growth in the number of maintenance contracts; growth in unit software sales is estimated at 8 percent. The cost of hardware and software is expected to increase 4 percent. Marketing expenses will be increased 5 percent in the coming year. Cost of hardware sales $6,720,000 Cost of software sales 2,400,000 Marketing expenses 1,200,000 Customer maintenance costs 1,280,000 Administrative expenses 2,240,000 Total costs and expenses $13,840,000 Operating income $2,160,000 The computer store is in the process of formulating its operating budget for next year and has made the following assumptions: The selling prices of hardware are expected to increase 10 percent but there will be no selling price increases for software and maintenance contracts. Hardware unit sales are expected to increase 5 percent with a corresponding 5 percent growth in the number of maintenance contracts growth in unit software sales is estimated at 8 percent. The cost of hardware and software is expected to increase 4 percent Marketing expenses will be increased 5 percent in the coming year. Three technicians will be added to the customer maintenance operations in the coming year, increasing the customer maintenance costs by $240,000. Administrative costs will be held at the same level. Compute the computer retail store's budgeted operating income for next year. $