INSTRUCTIONS: Smart Video Company is a manufacturer of videoconferencing products. Maintaining the videoconferencing equipment is an important area of customer satisfaction. A recent downturn in the computer industry has caused the videoconferencing equipment segment to suffer, leading to a decline in Smart Videos financial performance. The following income statement shows results for 2014: Smart Video Company Income Statement for the Year Ended December 31, 2014 (in thousands) Revenues Equipment $8,000 Maintenance contracts 1,900 Total revenues $9,900 Cost of goods sold 4,000 Gross margin 5,900 Operating costs Marketing 630 Distribution 100 Customer maintenance 1,100 Administration 920 Total operating costs 2,750 Operating income $3,150 Smart Videos management team is preparing the 2015 budget and is studying the following information: 1. Selling prices of equipment are expected to increase by 10% as the economic recovery begins. The selling price of each maintenance contract is expected to remain unchanged from 2014. 2. Equipment sales in units are expected to increase by 6%, with a corresponding 6% growth in units of maintenance contracts. 3. Cost of each unit sold is expected to increase by 5% to pay for the necessary technology and quality improvements. 4. Marketing costs are expected to increase by $290,000, but administration costs are expected to remain at 2014 levels. 5. Distribution costs vary in proportion to the number of units of equipment sold. 6. Two maintenance technicians are to be hired at a total cost of $160,000, which covers wages and related travel costs. The objective is to improve customer service and shorten response time. 7. There is no beginning or ending inventory of equipment. REQUIREMENT: 1. Prepare a budgeted income statement for the year ending December 31, 2015. Use cell references and formulas, where possible, in order to receive full credit. Use the same format as the income statement for 2014. Enter all amounts as positive values. SAVE & SUBMIT: After entering your answer in the second tab (ENTER SOLUTION HERE), save your spreadsheet by clicking FILE > SAVE AS. Make sure you DO NOT included spaces in your file name, and remember to save the file somewhere you will be able to find it, such as the Desktop.

Smart Video Company
Income Statement
For the Year Ended December 31, 2015
	(in thousands)
Revenues
Equipment
Maintenance contracts
Total revenues
Cost of goods sold
Gross margin
Operating costs
Marketing
Distribution
Customer maintenance
Administration
Total operating costs
Operating income