U Using sensitivity analysis Holly Company prepared the following budgeted income statement for the first quarter of 2021: HOLLY COMPANY Budgeted Income Statement For the Quarter Ended March 31, 2021 January February Sales Revenue (10% increase per month) $ 10,000 $ 11,000 Cost of Goods Sold (60% of sales) 6,000 6,600 Gross Profit 4,000 4,400 S&A Expenses ($1,000 + 10% of sales) 2,000 2,100 Operating Income 2,000 2,300 Income Tax Expense (30% of operating income) 600 690 Net Income $ 1,400 $ 1,610 March $ 12,100 7,260 4,840 2,210 2,630 789 $ 1,841 Total $ 33,100 19,860 13,240 6,310 6,930 2,079 $ 4,851 Holly Company is considering two options. Option 1 is to increase advertising by $1,000 per month. Option 2 is to use better-quality materials in the manufacturing process. The better materials will increase the cost of goods sold to 65% but will provide a better product at the same sales price. The marketing manager projects either option will result in sales increases of 20% per month rather than 10%. Requirements 1. Prepare budgeted income statements for both options, assuming January sales remain $10,000. 2. Which option should Holly choose? Explain your reasoning