Videocom Company is a manufacturer of videoconferencing products. Maintaining the videoconferencing equipment is an important area of customer satisfaction. A recent downturn in the computer industry has caused the videoconferencing equipment segment to suffer, leading to a decline in Videocom's financial performance. The following income statement shows results for 2017: (Click the icon to view the income statement.) Videocom's management team is preparing the 2018 budget and is studying the following information: (Click the icon to view the information.) Read the requirements. Videocom Company Income Statement for the Year Ended December 31, 2017 (in thousands) Revenues: Equipment 6,500 1,400 Maintenance contracts Total revenues 7,900 4,300 3,600 Cost of goods sold Gross margin Operating costs Marketing Distribution 640 110 Customer maintenance 1,300 940 Administration Total operating costs 2,990 $ 610 Operating income i More Info 1. 2. 3. Selling prices of equipment are expected to increase by 10% as the economic recovery begins. The selling price of each maintenance contract is expected to remain unchanged from 2017. Equipment sales in units are expected to increase by 6%, with a corresponding 6% growth in units of maintenance contracts. Cost of each unit sold is expected to increase by 5% to pay for the necessary technology and quality improvements. Marketing costs are expected to increase by $200,000, but administration costs are expected to remain at 2017 levels. Distribution costs vary in proportion to the number of units of equipment sold. Two maintenance technicians are to be hired at a total cost of $150,000, which covers wages and related travel costs. The objective is to improve customer service and shorten response time. There is no beginning or ending inventory of equipment. 4. 5. 6. 7. Requirement 1. Prepare a budgeted income statement for the year ending December 31, 2018. (Round your answers to the nearest whole thousand.) Videocom Company Budgeted Income Statement for 2018 (in thousands) Revenues: Equipment Maintenance contracts Total revenues Cost of goods sold Gross margin Operating costs Marketing Distribution Customer maintenance Administration Total operating costs Operating income