Question
The following information is available for year 1 for Pepper Products: Sales revenue (230,000 units)$5,060,000Manufacturing costsMaterials$298,000Variable cash costs253,000Fixed cash costs582,000Depreciation (fixed)1,775,000Marketing and administrative costsMarketing (variable,
The following information is available for year 1 for Pepper Products:
Sales revenue (230,000 units)$5,060,000Manufacturing costsMaterials$298,000Variable cash costs253,000Fixed cash costs582,000Depreciation (fixed)1,775,000Marketing and administrative costsMarketing (variable, cash)751,000Marketing depreciation266,000Administrative (fixed, cash)905,000Administrative depreciation133,000Total costs$4,963,000Operating profits$97,000
All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to fall by 2 percent, but prices are expected to rise by 18 percent. Material costs per unit are expected to increase by 9 percent. Other unit variable manufacturing costs are expected to decrease by 7 percent per unit. Fixed cash costs are expected to increase by 5 percent.
Variable marketing costs will change with unit volume. Administrative cash costs are expected to increase by 2 percent. Inventories are kept at zero. Pepper Products operates on a cash basis.
Required:
Prepare a budgeted income statement for year 2.(Do not round intermediate calculations. Round your final answers to the nearest whole dollar amounts.)
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