Demonstration Problem 3 Emerson Manufacturing Company produces two products: Model S and Model Z. The following income statement shows this year's operating results. Emerson Manufacturing Company Income Statement For the year ended December 31 $300,000 200,000 $500,000 150,000 120,000 Revenue: Model S Model Z Cost of goods sold: Model S Model Z Gross margin Operating costs: Marketing Distribution Depreciation Administration Operating income (270,000) $230,000 60,000 50,000 21,000 30,000 (161.000) $ 69.000 Emerson's management is in the process of preparing next year's budget. The following information is under consideration. 1. The selling price of Model S is expected to remain the same, but the units sold will increase by 6 percent 2. The selling price and units of Model Z will increase by 5 percent and 10 percent, respectively. 3. As indicated by the suppliers of key components, the cost of each unit sold will increase by 3 percent. 4. Marketing costs are expected to increase by $20,000. 5. Distribution costs remain the same fixed percentage of total sales revenue. 6. Depreciation costs remain unchanged. 7. A new administrative aide will be hired part time for $25,000. 8. There is no beginning or ending inventory. Required: Prepare a budgeted income statement for next year