Gulf States Manufacturing has the following data from year 1 operations, which are to be used for developing year 2 budget estimates:

Sales revenues (37,500 units)	$	2,500,000
Manufacturing costs
Materials	$	400,000
Variable cash costs		545,000
Fixed cash costs		216,000
Depreciation (fixed)		267,000
Marketing and administrative costs
Marketing (variable, cash)		285,000
Marketing depreciation		67,800
Administrative (fixed, cash)		270,300
Administrative depreciation		25,200
Total costs	$	2,076,300
Operating profits	$	423,700

All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $29,100 will be replaced in year 2 with new equipment that will incur an annual depreciation charge of $42,000. Sales volume and prices are expected to increase by 8 percent and 3 percent, respectively. On a per-unit basis, expectations are that materials costs will increase by 6 percent and variable manufacturing costs will decrease by 5 percent. Fixed cash manufacturing costs are expected to decrease by 9 percent.

Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 10 percent. Inventories are kept at zero. Gulf States operates on a cash basis.

Required:

Prepare a budgeted income statement for year 2.