Gulf States Manufacturing has the following data from year 1 operations, which are to be used for developing year 2 budget estimates: $2.025,000 $361,000 493,000 198,098 244,000 Sales revenues (22,see units) Manufacturing costs Materials Variable cash costs Fixed cash costs Depreciation (fixed) Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation Total costs Operating profits 256,000 62,000 248.000 5 22.000 51,884,000 $ 141,000 All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $15,550 will be replaced in year 2 with new equipment that will incur an annual depreciation charge of $22,000. Sales volume and prices are expected to increase by 9 percent and 5 percent, respectively. On a per-unit basis, expectations are that materials costs will increase by 7 percent and variable manufacturing costs will decreate by 2 percent Fixed cash manufacturing costs are expected to decrease by 5 percent Variable marketing costs will change with volume Administrative cash costs are expected to increase by 5 percent. Inventories are kept at zero Gulf States operates on a cash basis. GULF STATES MANUFACTURING Budgeted Income Statement For Year 2 Manufacturing costs: Total manufacturing costs Marketing and administrative costs: Total marketing and administrative costs Total costs GULF STATES MANUFACTURING Cash Basis Budgeted Income Statement For Year 2 Manufacturing costs: Total manufacturing costs Marketing and administrative costs: Total cash marketing and administrative costs Total cash costs