Prepare and Evaluate Budgeted Income Statement

Medford Stores, a retailer in a shopping mall, prepared the following income statement for its operations for the month just ended:

Sales commissions were $5\%$ of sales. Income taxes were $25\%$ of income before income taxes. Both should continue at the same rate for the remainder of the year.

Increase advertising expense by $15\%.$

Decrease all selling prices by $10\%.$

Increase the number of units sold by $20\%$ 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.

b$.$ Complete the following statement:

Medford's management $,$ should not $$ make the planned changes because the changes would result in a $$0,,$ decrease $$ in net income.