Gulf States Manufacturing has the following data from year 1 operations, which are to be used for developing year 2 budget estimates $1,620,000 Sales revenues (18,000 units) Manufacturing costs Materials Variable cash costs Fixed cash costs Depreciation (fixed) $ 289,000 395,000 159,000 195,000 Marketing and administrative costs Marketing (variable, cash) Marketing depreciation Administrative (fixed, cash) Administrative depreciation 208,000 51,000 204,000 $ 18,000 $1,519,000 $ 101,000 Total costs Operating profits All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $16,150 will be replaced in year 2 with new equipment that will incur an annual depreclation charge of $22,600. Sales volume and prices are expected to Increase by 10 percent and 6 percent, respectively. On a per-unit basis, expectations are that materials costs will increase by 8 percent and variable manufacturing costs will decrease by 2 percent. Fixed cash manufacturing costs are expected to decrease by 6 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 6 percent. Inventories are kept at zero. Gulf States operates on a cash basis