Merline Manufacturing makes its product for $60 per unit and sells it for $136 per unit.

prepare budgetwd income statements

is net income for march expected to increase with the proposed strategy changes?

Merline Manufacturing makes its product for $60 per unit and sells it for $136 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows. MERLINE MANUFACTURING Income Statement For Month Ended December 31, 20191 Sales Cost of goods sold frann nuafit $1,360,000 600,000 750 000 Income Statement For Month Ended December 31, 2019 Sales Cost of goods sold Gross profit Operating expenses Sales commissions (10%) Advertising Store rent Administrative salaries Depreciation-Office equipment Other expenses Total expenses Net income $1,360,000 600,000 760,000 136,000 212,000 24,600 43,000 53,000 12,600 481,200 $ 278,800 Management expects December's results to be repeated in January, February, and March of 2020 without any changes in strategy. Management, however, has an alternative plan. It believes that unit sales will increase at a rate of 10% each month for the next three months (beginning with January) if the item's selling price is reduced to $121 per unit and advertising expenses are increased by 10% and remain at that level for all three months. The cost of its product will remain at $60 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the same. 1. Prepare budgeted income statements for each of the months of January, February, and March that show the expected results from implementing the proposed changes. 2. Is net income for March expected to increase with the proposed strategy changes? ( MERLINE MANUFACTURING Budgeted Sales For Months of January, February, and March, 2020 January February Budgeted sales (in dollars) March Expenses Budgeted income Statement For Months of January, February, and March, 2020 January February Sales commissions. Advertising Store rent Administrative salaries March Expenses Sales commissions Advertising Store rent Administrative salaries Depreciation Office equipment Other expenses Total expenses Dequired 2 March expected to increase with the proposed strategy changes?