Games and Gadgets manufocture electronic products used in the entertainment industry. The industry has recorded a decline over the past 3 years as a result of the recession. Management realizes that it is not possible to increase prices at this time but still would like to increase profits. The management has been introduced to Kaizen costing and believes that this could assist in their desire to increase profits. The most recent income statement is given below, - Sales revenue is expected to increase by 3.5% since the recessions is just beginning to case and R. \& D will have available new products that will also increase sales. - The management team has deternined to make the following cost adjustments. The direct material is 32% of the cost of sales revenue. There will be a 6% increase in material cost as a result of changes on the world market. - Direct labour which is 32% of cost of sales revenue will bo increased by 3% as a result of an increase of wages agreed by the union however management will reduce the overall cost of wages after the increas 1% through the reduction of overtime cost and the removal of some part-time staff. Variable overheads will also be reduced by 2% through the management of indirect materials. - Rescarch and development (R \& D) is a key cost and it will be increased by 5% to improve the quality of the products and allow for faster movement of new products to the market. - Marketing cost is a mixed cost. Variable marketing is 6.5% of sales and the remaining cost are batched level cost. The batch level cost will be reduced by 2.5% and while the variable cost increase to 8% of sales. - The other operating expenses will be reduced as follows: Marketing 2%, Customer service cost2.5% and Administrative cost 4%. Required Prepare the budgeted income statement if the Kaizen costing adjustments are realized for the next year: (15 Marks) Games and Gadgets manufocture electronic products used in the entertainment industry. The industry has recorded a decline over the past 3 years as a result of the recession. Management realizes that it is not possible to increase prices at this time but still would like to increase profits. The management has been introduced to Kaizen costing and believes that this could assist in their desire to increase profits. The most recent income statement is given below, - Sales revenue is expected to increase by 3.5% since the recessions is just beginning to case and R. \& D will have available new products that will also increase sales. - The management team has deternined to make the following cost adjustments. The direct material is 32% of the cost of sales revenue. There will be a 6% increase in material cost as a result of changes on the world market. - Direct labour which is 32% of cost of sales revenue will bo increased by 3% as a result of an increase of wages agreed by the union however management will reduce the overall cost of wages after the increas 1% through the reduction of overtime cost and the removal of some part-time staff. Variable overheads will also be reduced by 2% through the management of indirect materials. - Rescarch and development (R \& D) is a key cost and it will be increased by 5% to improve the quality of the products and allow for faster movement of new products to the market. - Marketing cost is a mixed cost. Variable marketing is 6.5% of sales and the remaining cost are batched level cost. The batch level cost will be reduced by 2.5% and while the variable cost increase to 8% of sales. - The other operating expenses will be reduced as follows: Marketing 2%, Customer service cost2.5% and Administrative cost 4%. Required Prepare the budgeted income statement if the Kaizen costing adjustments are realized for the next year: (15 Marks)