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, 2015
Sales	$	1,360,000
Cost of goods sold		600,000
Gross profit		760,000
Operating expenses
Sales commissions (10%)		136,000
Advertising		212,000
Store rent		24,600
Administrative salaries		43,000
DepreciationOffice equipment		53,000
Other expenses		12,600
Total expenses		481,200
Net income	$	278,800

Management expects Decembers results to be repeated in January, February, and March of 2016 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.

Prepare budgeted income statements for each of the months of January, February, and March that show the expected results from implementing the proposed changes.

MERLINE MANUFACTURING
Budgeted Sales
For Months of January, February, and March, 2016
	January	February	March
Budgeted sales (in units)
Budgeted selling price per unit	$121
Budgeted sales (in dollars)
MERLINE MANUFACTURING
Budgeted Income Statement
For Months of January, February, and March, 2016
	January	February	March
Sales
Cost of goods sold
Gross profit
Expenses
Sales commissions
Advertising
Store rent
Administrative salaries
DepreciationOffice equipment
Other expenses
Total expenses	0	0	0
Net income	$0	$0	$0