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Merline Manufacturing makes its product for $ 6 5 per unit and sells it for $ 1 3 1 per unit. The sales staff receives
Merline Manufacturing makes its product for $ per unit and sells it for $ per unit. The sales staff receives a commission of of sales. Its December income statement follows.
MERLINE MANUFACTURING
Income Statement
For Month Ended December
Sales $
Cost of goods sold
Gross profit
Selling, general, and administrative expenses
Sales commissions $
Advertising
Office rent
Administrative salaries
DepreciationOffice equipment
Office Insurance
Net income $
Management expects Decembers results to be repeated in January, February, and March without any changes in strategy. Management, however, has an alternative plan. It believes that if the unit selling price is reduced to $ per unit and advertising is increased to $ per month, sales units will be for January, for February, and for March. The cost of its product will remain at $ per unit, the sales staff will continue to earn a commission, and the remaining expenses will stay the same.
Required:
Prepare budgeted income statements for each of the months of January, February, and March that show results from implementing the proposed plan.
For the proposed plan, is income in March budgeted to be higher than income in December?
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