Walker House, Inc., a multinational company based in Maryland, organizes and coordinates art shows and auctions throughout the world. Budgeted and actual costs and expenses for 2018 are compared in the following schedule.

2018 Amounts

Expense items Budget Actual

Salaries expense, staging $480,000 $513,000

Salaries expense, executive 380,000 447,000

Travel costs 640,000 652,000

Auctioneer services 540,000 450,000

Space rental costs 251,000 247,000

Printing costs 192,000 182,000

Advertising expense 169,000 183,000

Insurance, merchandise 85,000 77,000

Insurance, liability 64,000 67,000

Home office costs 209,000 220,000

Shipping costs 105,000 113,000

Miscellaneous 25,000 26,000

Total expenses $3,140,000 $3,177,000

Net sales $6,200,000 $6,370,000

For 2019, the following fixed costs have been budgeted: executive salaries, $440,000; advertising expense, $190,000; merchandise insurance, $80,000; and liability insurance, $68,000. Additional information follows.

1. Net sales are expected to be $6,400,000 in 2019.
2. Salary expenses for staging will increase 20 percent over actual figures for 2018.
3. Travel costs are expected to be 11 percent of net sales.
4. Auctioneer services will be billed at 10 percent of net sales.
5. Space rental costs will go up 20 percent from 2018 budgeted amounts.
6. Printing costs are expected to be $190,000 in 2019.
7. Shipping costs are expected to rise 20 percent over 2018 budgeted amounts.
8. Miscellaneous expenses for 2019 will be budgeted at $28,000.
1. Home office costs are budgeted for $230,000 for 2019.

Required:

1. Prepare the companys budgeted income statement for 2019.
2. Should the budget director be worried about the trend in the companys operations? Be specific.