Soffit, Inc., is developing a budget for next year. Management is not pleased with the low net income the first draft of budget showed. Management is considering buying a less expensive direct material. This will reduce direct material cost by $2 per unit.

1) What effect will this lower purchase price have on the budgeted income statement? (3 points)

2) What effect will this lower purchase price have on the budgeted balance sheet? (3 points)

3) What effect will this lower purchase price have on the budgeted cash flows? (2 points)

4) What nonfinancial considerations need to be considered? (2 points)