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 39 desk units (sales price of $1,210) and 16 chairs (sales price of $460).

BUSINESS SOLUTIONS
Segment Income Statement*
For Quarter Ended March 31, 2016
Sales	$	163,650
Cost of goods sold		121,950
Gross profit		41,700
Expenses
Sales commissions (10%)		16,365
Advertising expenses		7,800
Other fixed expenses		16,800
Total expenses		40,965
Net income	$	735

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

Revenue: (117 desks $1,210) + (48 chairs $460) = $141,570 + $22,080 = $163,650

Cost of goods sold: (117 desks $710) + (48 chairs $210) + $28,800 = $121,950

Santana Rey believes that sales will increase each month for the next three months (April, 47 desks, 28 chairs; May, 51 desks, 31 chairs; June, 55 desks, 34 chairs) if selling prices are reduced to $1,090 for desks and $410 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 $710 for desks and $210 for chairs. The sales staff will continue to earn a 10% commission, the fixed manufacturing costs per month will remain at $9,600 and other fixed expenses will remain at $5,600 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

30.00 points Santana Rey expects second-quarter 2016 sales of her new line of computer furniture to be the same as the first quarter's sales (reported below) without any changes in strategy. Monthly sales averaged 39 desk $1,210) and 16 chairs (sales price of S460) units (sales price o BUSINESS SOLUTIONS Segment Income Statement For Quarter Ended March 31, 2016 163,650 Cost of goods sold 121,950 Gross profit 41.700 Sales commissions (10%) 16.365 Advertising expenses 7.800 Other fixed expenses. 6.800 Total expenses 40,965 Net income 735 Reflects revenue and expense activity only related to the computer furniture segment. $1,210) (48 chairs $460) $141,570 S22,080 $163,650 t Revenue 17 desks x 17 desks x $710) (48 chairs x $210) S28,800 $121,950 t Cost of goods sold Santana Rey believes that sales will increase each month for the next three months (April, 47 desks, 28 selling prices are reduced to $1,090 for chairs; May, 51 desks, 31 chairs June, 55 desks, 34 chairs desks and S410 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 S710 for desks and $210 for chairs. The sales staff remain at $9,600 and continue to earn a 10% commissi on, the fixed manufacturing costs per month w other fixed expenses will remain at S5,600 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. Answer is not complete BUSINESS SOLUTIONS Budgeted Income Statements For Months of April, May, and June April May June 62,710 73,890 Sales 68,300 Cost of goods sold 73,890 Gross profi 62,710 68,300 Expenses Sales commissions Advertising 0 0 Other fixed expenses Total expenses Net income (loss) 2. Recommend whether Santana Rey should implement the proposed changes O Should not implement the proposed changes Should implement the proposed changes