Problem 22-3A (Algo) Manufacturing: Preparation and analysis of budgeted income statements LO P3 Merline Manufacturing makes its product for $55 per unit and sells it for $135 per unit. The sales staff receives a commission of 10% of sales. Its December income statement follows. MERLINE MANUFACTURING Income Statement For Month Ended December 31 Sales $ 1,350,000 Cost of goods sold 550,000 Gross profit Selling, general, and administrative expenses Sales commissions (10%) 800,000 Advertising Office rent Administrative salaries Depreciation-Office equipment Office Insurance Net income 135,000 210,000 24,500 42,500 52,500 12,500 477,000 $ 323,000 Management expects December's results to be repeated in January, February, and March without any changes in strategy. Management, however, has an alternative plan. It believes that if the unit selling price is reduced to $120 per unit and advertising is increased to $262,500 per month, sales units will be 11,000 for January, 12,100 for February, and 13,310 for March. The cost of its product will remain at $55 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the same. Required: 1. Prepare budgeted income statements for each of the months of January, February, and March that show results from implementing the proposed plan. 2. For the proposed plan, is income in March budgeted to be higher than income in December?