Problem 22-3A Manufacturing: Preparation and analysis of budgeted income statements LO P3

Problem 22-3A Manufacturing: Preparation and analysis of budgeted income statements LO P3 Merline Manufacturing makes its product for $75 per unit and sells it for $139 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, 2019 Sales $1,390,000 Cost of goods sold 750,000 Gross profit 640,000 Operating expenses Sales commissions (10%) 139,000 Adus Advertising 218,000 sto Store rent 24,900 Administrative salaries 44,500 Depreciation office equipment 54,500 Other expenses 12,900 Total expenses 493,800 Net income $ 146,200 Management expects December's results to be repeated in January, February, and March of 2020 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 $124 per unit and advertising expenses are increased by 25% and remain at that level for all three months. The cost of its product will remain at $75 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 the expected results from implementing the proposed changes. 2. Is net income for March expected to increase with the proposed strategy changes? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare budgeted income statements for each of the months of January, February, and March that show the expected results from implementing the proposed changes. (Enter your final answers in whole dollars.) MERLINE MANUFACTURING Budgeted Sales For Months of January, February, and March, 2020 January February March Budgeted sales (in units) Budgeted selling price per unit Budgeted sales in dollars) $ 124 MERLINE MANUFACTURING Budgeted Income Statement For Months of January, February, and March, 2020 January February March Expenses Sales commissions Advertising Store rent Administrative salaries DepreciationOffice equipment Other expenses Total expenses 0 0 0 $ 0 $ 0 $ 0 Required 1 Required 2 Is net income for March expected to increase with the proposed strategy changes? Is net income for March expected to increase with the proposed strategy changes? No