Original:

Sales Budget

January February March Quarter

Budgeted Units Sold 10,500 11,025 11,576 33,101

Budgeted Sales Price 200 200 200 200

Budgeted Sales Revenue 2,100,000 2,205,000 2,315,200 6,620,200

After decreasing the selling price from $200 to $160, the sales increase to 7% as follows

Sales Budget

January February March Quarter

Budgeted Units Sold: 10,700 11,449 12,250 34,399

Budgeted Sales Price: 160 160 160 160

Budgeted Sales Revenue: 1,712,000 1,831,840 1,960,000 5,503,840

Pro-forma income statement

Sales $6,620,200

Cost of goods sold -$4,303,130

Gross profit $2,317,070

Selling and administrative $1,556,558

Operating income$760,512

Interest expense -$1,130

Income before taxes$759,382

Income tax expense$227,815

Net income$531,567

The sales manager now propose to decrease the price to $120. would you recommend the proposal?