Check my wor Problem 20-3A (Static) Manufacturing: Preparation and analysis of budgeted income statements LO P3 Merline Manufacturing makes its product for $75 per unit and sells it for $150 per unit. The sales staff receives a commission of 10% of sales. Its December income statement follows. MERLINE MANUFACTURING Income Statement For Month Ended December 31 Sales Cost of goods sold Gross profit Selling, general, and administrative expenses Sales commissions (10%) Advertising Office rent $225,000 Administrative salaries Depreciation-office equipment $2,250,000 1,125,eee 1,125,000 250,000 30,000 45,000 50,000 10,000 Office Insurance Net income 610,000 $515,000 Management expects December's results to be repeated in January, February, and March without any changes in strategy. Management, however, has an alternative plan. It believes that if the unit selling price is reduced to $125 per unit and advertising is increased to $287,500 per month, sales units will be 16,500 for January, 18,150 for February, and 19,965 for March. The cost of its product will remain at $75 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the same.