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 40 desk units (sales price of $1,220) and 17 chairs (sales price of $470).

BUSINESS SOLUTIONS
Segment Income Statement*
For Quarter Ended March 31, 2016
Sales	$	170,370
Cost of goods sold		126,720
Gross profit		43,650
Expenses
Sales commissions (10%)		17,037
Advertising expenses		8,100
Other fixed expenses		17,100
Total expenses		42,237
Net income	$	1,413

* Reflects revenue and expense activity only related to the computer furniture segment.

Revenue: (120 desks $1,220) + (51 chairs $470) = $146,400 + $23,970 = $170,370

Cost of goods sold: (120 desks $720) + (51 chairs $220) + $29,100 = $126,720

Santana Rey believes that sales will increase each month for the next three months (April, 48 desks, 29 chairs; May, 52 desks, 32 chairs; June, 56 desks, 35 chairs) if selling prices are reduced to $1,100 for desks and $420 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 $720 for desks and $220 for chairs. The sales staff will continue to earn a 10% commission, the fixed manufacturing costs per month will remain at $9,700 and other fixed expenses will remain at $5,700 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 not implement the proposed change