Spin Cycle's Company is a manufacturer of commercial grade exercise bikes that are sold to hotels and health clubs. Maintaining the bikes is an important area of customer satisfaction. Because of increase industry competition, Spin Cycle's financial performance has suffered. However, the introduction of a new model and a predicted upturn in the economy are leading Spin Cycle's managers to predict improved performance in 2021. The following income statement shows results for 2020.

Company Income Statement for the Year Ended December 31,2020 (in thousands)

Revenues:
Equipment	$12,000
Maintenance contracts	4,000
Total revenues		$16,000
Cost of goods sold		10,000
Gross margin		6,000
Operating costs
Marketing	800
Distribution	200
Customer maintenance	300
Administration	900
Total operating costs		2,200
Operating income		$3,800

1. Selling prices of bikes are expected to increase by 15% due to the introduction of the new model. The selling price of each maintenance contract is expected to remain unchanged from 2020.

2. Bike sales in units are expected to increase by 10%, with a corresponding 10% growth in units of maintenance contracts.

3. Cost of each unit sold is expected to increase by 8% to pay for the necessary technology and quality improvements for the new model.

4. Marketing costs are expected to increase by $200,000.

5. Distribution costs vary in proportion to the number of bikes sold.

6. One additional maintenance technician is to be hired at a total cost of $60,000, which covers wages and related travel costs. The objective is to improve customer service and shorten response time.

7. There are no anticipated changes to adminstration costs.

8. There is no beginning or ending inventory of equipment.

Requirements

1.	Prepare a budgeted income statement for the year ending December 31,2021.
2.	How well does the budget align with Spin Cycle's strategy?
3.	How does preparing the budget help Spin Cycle's management team better manage the company?