The following information is available for year 1 for Pepper Products:

Sales revenue (190,000 units)	$	3,800,000
Manufacturing costs
Materials	$	224,000
Variable cash costs		190,000
Fixed cash costs		438,000
Depreciation (fixed)		1,336,000
Marketing and administrative costs
Marketing (variable, cash)		565,000
Marketing depreciation		201,000
Administrative (fixed, cash)		684,000
Administrative depreciation		100,000
Total costs	$	3,738,000
Operating profits	$	62,000

All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to fall by 5 percent, but prices are expected to rise by 17 percent. Material costs per unit are expected to increase by 8 percent. Other unit variable manufacturing costs are expected to decrease by 7 percent per unit. Fixed cash costs are expected to increase by 4 percent.

Variable marketing costs will change with unit volume. Administrative cash costs are expected to increase by 3 percent. Inventories are kept at zero. Pepper Products operates on a cash basis.

Required:

Prepare a budgeted income statement for year 2.

PEPPER PRODUCTS
Budgeted Income Statement
For Year 2
Sales revenue
Manufacturing costs:
Materials
Marketing (variable, cash)
Fixed cash costs
Depreciation (fixed)
Total manufacturing costs	$0
Marketing and administrative costs:
Marketing (variable, cash)
Marketing depreciation
Administrative (fixed, cash)
Administrative depreciation
Total marketing and administrative costs	$0
Total costs	$0
Operating profit