i X More Info Option 1 is to increase advertising by $700 per month. Option 2 is to use better-quality materials in the manufacturing process. The better materials will increase the cost of goods sold to 45% but will provide a better product at the same sales price. The marketing manager projects either option will result in sales increases of 30% per month rather than 20%. Print Done i X Requirements 1. Prepare budgeted income statements for both options, assuming both options begin in January and January sales remain $8,000. Round all calculations to the nearest dollar 2. Which option should Holly choose? Explain your reasoning. Print Done Holly Company prepared the following budgeted income statement for the first quarter of 2024: (Click the icon to view the budgeted income statement.) Holly Company is considering two options. A (Click the icon to view the options.) Read the requirements Requirement 1. Prepare budgeted income statements for both options, assuming both options begin in January and January sales remain $8,000. Round all calculations to the nearest dollar. Begin by preparing the budgeted income statement for Option 1. Holly Company Budgeted Income Statement For the Quarter Ended March 31, 2024 January March Total Sales Revenue 8,000 February 10,400 4,160 31,920 13,520 5,408 Cost of Goods Sold 3,200 12,768 Gross Profit 4,800 6,240 8,112 19,152 3,500 3,740 4,052 11,292 S and A Expenses Operating Income 2,500 1,300 390 4,060 1,218 7,860 2,358 Income Tax Expense 750 Net Income 910 1,750 2,842 5,502 Now prepare the budgeted income statement for Option 2. (Round all amounts to the nearest whole number.) Holly Company Budgeted Income Statement For the Quarter Ended March 31, 2024 January February March Total Sales Revenue Cost of Goods Sold Gross Profit S and A Expenses Operating Income Income Tax Expense Net Income Requirement 2. Which option should Holly choose? Explain your reasoning. If one of the two options is chosen, it would be V because net income for the quarter is expected to be higher under this option. However, because both options are expected to yield net income for the quarter than the $5,992 currently budgeted, Holly may decide Data Table X March Total 11,520 $ 29,120 Holly Company Budgeted Income Statement For the Quarter Ended March 31, 2024 January February Net Sales Revenue (20% increase per month) $ 8,000 $ 9,600 $ Cost of Goods Sold (40% of sales) 3,200 3,840 Gross Profit 4,800 5,760 S and A Expenses ($2,000 + 10% of sales) 2,800 2,960 Operating Income 2,000 2,800 Income Tax Expense (30% of operating income) 600 840 $ Net Income 1,400 $ 1,960 $ 4,608 11,648 17,472 6,912 3,152 8,912 3,760 1,128 2,632 $ 8,560 2,568 5,992 Print Done