Question
[The following information applies to the questions displayed below.] Gulf States Manufacturing has the following data from year 1 operations, which are to be used
[The following information applies to the questions displayed below.]
Gulf States Manufacturing has the following data from year 1 operations, which are to be used for developing year 2 budget estimates:
Sales revenues (16,000 units) | $ | 1,440,000 |
Manufacturing costs | ||
Materials | $ | 257,000 |
Variable cash costs | 351,000 | |
Fixed cash costs | 141,000 | |
Depreciation (fixed) | 173,000 | |
Marketing and administrative costs | ||
Marketing (variable, cash) | 184,000 | |
Marketing depreciation | 45,000 | |
Administrative (fixed, cash) | 180,000 | |
Administrative depreciation | $ | 16,000 |
Total costs | $ | 1,347,000 |
Operating profits | $ | 93,000 |
All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $15,950 will be replaced in year 2 with new equipment that will incur an annual depreciation charge of $22,400. Sales volume and prices are expected to increase by 12 percent and 6 percent, respectively. On a per-unit basis, expectations are that materials costs will increase by 10 percent and variable manufacturing costs will decrease by 2 percent. Fixed cash manufacturing costs are expected to decrease by 7 percent.
Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 8 percent. Inventories are kept at zero. Gulf States operates on a cash basis.
Required: Prepare a budgeted income statement for year 2. (Do not round intermediate calculations.) Required: Estimate the cash from operations expected in year 2. (Do not round intermediate calculations.) GULF STATES MANUFACTURING Budgeted Income Statement For Year 2 GULF STATES MANUFACTURING Cash Basis Budgeted Income Statement For Year 2 Manufacturing costs: Manufacturing costs: Total manufacturing costs Marketing and administrative costs: Total manufacturing costs Marketing and administrative costs: Total marketing and administrative costs Total cash marketing and administrative costs Total cash costs Total costsStep by Step Solution
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