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Medford Stores, a retailer in a shopping mall, prepared the following income statement for its operations for the month just ended: MEDFORD STORES Income Statement

Medford Stores, a retailer in a shopping mall, prepared the following income statement for its operations for the month just ended:
MEDFORD STORES
Income Statement
For the Month Ended April 30
Sales $1,925,000
Cost of goods sold 907,500
Gross profit 1,017,500
Operating expenses:
Sales commissions expense $96,250
Advertising expense 247,500
Lease expense 137,500
Depreciation expense 55,000
Salaries expense 110,000
Other operating expenses 68,750715,000
Income before income taxes 302,500
Income tax expense 75,625
Net income $226,875
Sales commissions were 5% of sales. Income taxes were 25% of income before income taxes. Both should continue at the same rate for the remainder of the year.
Medford Stores is preparing the budget for the month of May. If no basic changes are made, Medfords management expects that the income statement would be virtually identical to the one for April. However, Medfords management has decided to make some changes in the operations. The plans include the following:
1. Increase advertising expense by 15%.
2. Decrease all selling prices by 10%.
3. Increase the number of units sold by 20% as a result of the first two changes.
a. Prepare a budgeted income statement for the month of May. Round all amounts on the
income statement to the nearest dollar.
MEDFORD STORES
Budgeted Income Statement
For the Month Ended May 31
Sales Answer
0
Cost of Goods Sold Answer
0
Gross Profit
0
Operating Expenses:
Sales Commission Expense Answer
0
Advertising Expense Answer
0
Lease Expense Answer
0
Depreciation Expense Answer
0
Salaries Expense Answer
0
Other Operating Expenses Answer
0
0
Income (Loss) before Income Taxes
0
Income Tax Expense Answer
0
Net Income (Loss)
0
b. Complete the following statement:
Medfords management Answer
make the planned changes because the changes would result in a $Answer
0
Answer
in net income.

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