December Sales Units = Budgeted Jan Sales Units = Budgeted Feb Sales Units = Budgeted Mar Sales Units = February March Merline Manufacturing Budgeted Income Statement For First Quarter January 98 Budgeted Sales Revenue (dollars) 99 Cost of goods sold 100 Gross Profit 101 Operating Expenses: 102 Sales Commissions 103 Advertising 104 Store rent 105 Administrative salaries 106 Depreciation - Office Equipment 107 Other expenses 108 Total expenses 109 Net Income 110 February Self Check: 111 Analysis Sheet1 Problem 20-3A Manufacturing: Preparation and analysis of budgeted income statements P3 Merline Manufacturing makes its product for $75 per unit and sells it for $150 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows. MERLINE MANUFACTURING Income Statement For Month Ended December 31, 2019 Sales $2,250,000 Cost of goods sold 1,125,000 Gross profit 1,125,000 Operating expenses Sales commissions (10%) 225,000 Advertising 250,000 Store rent 30,000 Administrative salaries 45,000 Depreciation-Office equipment 50,000 Other expenses 10,000 Total expenses 610,000 Net income $ 515,000 Management expects December's results to be repeated in January, February, and March of 2020 without any changes in strategy. Management, however, has an alternative plan. It believes that unit sales will increase at a rate of each month for the next three months (beginning with January) if the item's selling price is reduced to Suas per unit and Page 809 vertising expenses are increased by 15 and remain at that level for all three months. The cost of its product will remainst 575 per unit, the sales staff will continue to earn a commission, and the remaining expenses will stay the same. Required 1. Prepare budgeted income statements for each of the months of January, February, and March that show the expected els from implementing the proposed changes. Use a three-column format, with one column for each month Check (1) Budgeted net income: January, $196,250 Analysis Component 2. Is net income for March axpected to increase with the proposed strategy changes Problem 20-4 Manufacturin