Sele Paragraph Styles Editin Gross Profit $ 21,652,639 $ 27,541,343 $ 33,455,860 $ 27,899,000 $ 24,425,000 Attributable costs Marketing 5,894,986 6,140,610 5,774,328 5,140,800 4,758,750 Other (primarily fixed) 2,517,537 2,502,522 2,317,150 2,106,500 1,915,000 Product line profit before G&A allocation $ 13,240,117 $ 18,898,211 $ 25,364,382 $ 20,651,700 $ 17,751,250 Return on Sales 16.84% 23.08% 29.43% 27.32% 26.30% Q. 1. Prepare a budgeted income statement for First-Class Ovenware for 2007 if the engineers' redesign efforts had worked as originally planned. Use these assumptions: a. First quarter sales of 1,500,000 units will be achieved each quarter in 2007. b. The selling price for 2007 will remain 10% below the price charged from 2002-2006, and there were no sales price increases during the 2002-2006 period c. Variable cost of goods sold averaged about $5.55 per unit of ovenware from 2002-2006. d. Variable production costs will be reduced by 35% due to the new design. e. The fixed cost of production in 2006 contained one-time, increased costs (about $4,000,000) for the design changes. For 2007, fixed costs are expected to be about 3.5% higher than 2005. f. Marketing costs contain both fixed and variable elements, however, it is budgeted based on spending 7% of expected sales revenue. g. Other fixed costs are expected to increase about 2.5% over 2006.EXHIBIT ONE Kitchen Essential Products Inc. First-Class Ovenware Product Income Statement For the years ended December 31, 2002-2006 2006 2005 2004 2003 2002 Sales $ 78,599,808 $ 81,874,800 $ 86,184,000 $ 75,600,000 $ 67,500,000 Sales in units 5,239,987 5,458,320 5,745,600 5,040,000 4,5*00,000 Cost of Goods Sold Variable 29,081,929 31,112,424 31,026,240 27,972,000 24,975,000 Fixed 27,865,240 23,221,033 21,701,900 19,729,000 18,100,000 Gross Profit $ 21,652,639 $ 27,541,343 $ 33,455,860 $ 27,899,000 $ 24,425,000 Attributable costs Marketing 5,894,986 6,140,610 5,774,328 5,140,800 4,758,750 Other (primarily fixed) 2,517,537 2,502,522 2,317,150 2,106,500 1,915,000 Product line profit before G&A allocation $ 13,240,117 $ 18,898,211 $ 25,364,382 $ 20,651,700 $ 17,751,250 Return on Sales 16.84% 23.08% 29.43% 27.32% 26.30% Q. 1. Prepare a budgeted income statement for First-Class Ovenware for 2007 if the engineers' redesign efforts had worked as originally planned. Use these assumptions: a. First quarter sales of 1,500,000 units will be achieved each quarter in 2007. b. The selling price for 2007 will remain 10% below the price charged from 2002-2006, and there were no sales price increases during the 2002-2006 period. c. Variable cost of goods sold averaged about $5.55 per unit of ovenware from 2002-2006. d. Variable production costs will be reduced by 35% due to the new design