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Prepare and Evaluate Budgeted Income Statement Fairfield Stores, a retailer in a shopping mall, prepared the following income statement for its operations for the month

Prepare and Evaluate Budgeted Income Statement
Fairfield Stores, a retailer in a shopping mall, prepared the following income statement for its operations for the month just ended:
FAIRFIELD STORES
Income Statement
For the Month Ended April 30
Sales $800,000
Cost of goods sold 384,000
Gross profit 416,000
Operating expenses:
Sales commissions expense $80,000
Advertising expense 96,000
Lease expense 32,000
Depreciation expense 16,000
Salaries expense 48,000
Other operating expenses 24,000296,000
Income before income taxes 120,000
Income tax expense 42,000
Net income $78,000
Sales commissions were 10% of sales. Income taxes were 35% of income before income taxes. Both should continue at the same rate for the remainder of the year.
Fairfield Stores is preparing the budget for the month of May. If no basic changes are made, Fairfields management expects that the income statement would be virtually identical to the one for April. However, Fairfields management has decided to make some changes in the operations. The plans include the following:
1. Increase advertising expense by 45%.
2. Decrease all selling prices by 15%.
3. Increase the number of units sold by 30% 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.

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