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Trophy Company prepared the follwing budgeted income statement for the first quarter of 2019: January Sales Revenue (15% increase per month) Cost of Goods Sold

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Trophy Company prepared the follwing budgeted income statement for the first quarter of 2019: January Sales Revenue (15% increase per month) Cost of Goods Sold (45% of Sales) Gross Profit Selling & Admin Expenses ($2,500+9% of Sales) Operating Income (Before Taxes) Income Tax Expense (25% of Operating Income) Net Income $30.000 $13,500 $16,500 $5,200 $11,300 $2,825 $8,475 February $34,500 $15,525 $18,975 $5,605 $13,370 $3,343 $10,028 March $39,675 $17,854 $21,821 $6,071 $15,751 $3,938 $11,813 Trophy Company is considering two options. Option 1 is to increase advertising by $800 per month. Option 2 seeks better production materials which will increase Cost of Goods Sold to 48% of Sales Management projects each of these will increase sales by 22% per month rather than 15% Required: 1. Prepare Budgeted Income Statements for both Options, assuming both options begin in January. January sales will remain at $30,000. 2. Which option should Trophy Company choose? Explain your answer. Option 1 Trophy Company Pro Forma Income Statement Quarter Ended March 31, 2019 January February March Total Sales Revenue Cost of Goods Sold Gross Profit S&A Expenses Operating Income Income Tax Expense Net Income Option 2 Trophy Company Pro Forma Income Statement Quarter Ended March 31, 2019 January February March Total Sales Revenue Cost of Goods Sold Gross Profit S&A Expenses Operating Income Income Tax Expense Net Income Which option is best? Explain your

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