Question
The following information is available for RCA Industries from year 1 operations: Sales revenue (65,000 units) $ 1,735,000 Manufacturing costs Materials $ 260,000 Variable cash
The following information is available for RCA Industries from year 1 operations:
Sales revenue (65,000 units) $ 1,735,000
Manufacturing costs
Materials $ 260,000
Variable cash costs 565,000
Fixed cash costs 347,000
Depreciation (fixed) 180,000
Marketing and administrative costs
Marketing (variable, cash) 191,000
Marketing depreciation 61,000
Administrative (fixed, cash) 182,000
Administrative depreciation 25,000
Total costs $ 1,811,000
Operating profits (losses) $ (76,000)
All depreciation charges are fixed. Sales volume is expected to decrease by 2 percent. Sales price is expected to increase by 8 percent. On a per-unit basis, expectations are that materials costs will decrease by 5 percent and variable manufacturing cash costs will increase by 4 percent. Fixed cash manufacturing costs are expected to increase by 12 percent.
Variable marketing costs will change with volume. Administrative cash costs are expected to decrease by 15 percent. Inventories are kept at zero. Fairmount Industries operates on a cash basis. No change is expected in marketing or administrative depreciation.
Required: Prepare a budgeted income statement for year 2. Round your numbers to the nearest integers.
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