Question
Eagle Eye Bhd. (EEB) is a manufacturing company producing videoconferencing products. Regular units are manufactured to meet marketing projections and specialized units are made after
Eagle Eye Bhd. (EEB) is a manufacturing company producing videoconferencing products. Regular units are manufactured to meet marketing projections and specialized units are made after an order is received. Maintaining the video conferencing equipment is an important area of customer satisfaction. Computer industry now is facing the downturn phase. The videoconferencing equipment segment has suffered which leads to a decline in EEB financial performance. The following income statement shows result for 2014:
Eagle Eye Bhd.
Statement of Comprehensive Income
For the Year Ended 31 December 2014
Revenues: (RM) (RM)
Equipment 6,000,000
Maintenance 1,800,000
and contracts
Total revenues 7,800,000
Cost of goods sold 4,600,000
Gross margin 3,200,000
Operating costs:
Marketing 600,000
Distribution 150,000
Customer maintenance 1,000,000
Administration 900,000
Total operating costs 2,650,000
Operating income 550,000
Additional information:
1.Selling prices of equipment are expected to increase by 10% as the industry begins to recover. There will be no changes in the selling price of each maintenance contract from 2014.
2.Equipment sales in units are expected to increase by 6%, with a corresponding 6% growth in units of maintenance contracts.
3.Cost of goods sold is expected to increase by 3% to pay for the necessary technology and quality improvements.
4.Marketing costs are expected to increase by RM250,000, but administrative costs are expected to remain the same.
5.Distribution costs vary in proportion to the number of units of equipment sold.
6.Two maintenance technicians are to be hired at a total cost of RM130,000, which covers wages and related travel costs. The objective is to improve customer service and shorten response time.
7.There is no beginning or ending inventory of equipment.
REQUIRED:
budgeted statement of comprehensive income for EEB for the year ended 31 December 2015.
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