Santana Rey expects second-quarter 2016 sales of her new line of computer furniture to be the same as the first quarters sales (reported below) without any changes in strategy. Monthly sales averaged 45 desk units (sales price of $1,330) and 28 chairs (sales price of $580). BUSINESS SOLUTIONS Segment Income Statement* For Quarter Ended March 31, 2016 Sales $ 228,270 Cost of goods sold 172,170 Gross profit 56,100 Expenses Sales commissions (10%) 22,827 Advertising expenses 11,400 Other fixed expenses 20,400 Total expenses 54,627 Net income $ 1,473 * Reflects revenue and expense activity only related to the computer furniture segment. Revenue: (135 desks $1,330) + (84 chairs $580) = $179,550 + $48,720 = $228,270 Cost of goods sold: (135 desks $830) + (84 chairs $330) + $32,400 = $172,170 Santana Rey believes that sales will increase each month for the next three months (April, 53 desks, 40 chairs; May, 57 desks, 43 chairs; June, 61 desks, 46 chairs) if selling prices are reduced to $1,240 for desks and $530 for chairs, and advertising expenses are increased by 10% and remain at that level for all three months. The products variable cost will remain at $830 for desks and $330 for chairs. The sales staff will continue to earn a 10% commission, the fixed manufacturing costs per month will remain at $10,800 and other fixed expenses will remain at $6,800 per month. Required: 1. Prepare budgeted income statements for each of the months of April, May, and June that show the expected results from implementing the proposed changes. Use a three-column format, with one column for each month. 2. Recommend whether Santana Rey should implement the proposed changes. Should implement the proposed changes Should not implement the proposed changes

1. Prepare budgeted income statements for each of the months of April, May, and June that show the expected results from implementing the proposed changes. Use a three-column format, with one column for each month. BUSINESS SOLUTIONS Budgeted Income Statements r Months of April, May, and June April May June 86,920S 93,470 $100,020 86,920 93,470 100,020 Expenses Sales commissions Advertising Other fixed expenses Total expenses Net income (loss)