The following information is available for Year 1 for Solano Products:

All depreciation costs are fixed and are expected to remain the same for Year 2. Sales volume is expected to increase by 20 percent, and prices are expected to increase by 5 percent. Materials costs are expected to decrease by 8 percent per unit. Variable manufacturing costs are expected to decrease by 2 percent per unit. Fixed manufacturing costs, other than depreciation, are expected to increase by 5 percent.
Variable marketing costs change with volume. Administrative costs are expected to increase by 10 percent.
Prepare a master budget profit plan for Year 2. Use a format similar to the one shown in Exhibit 9.7. Management wants to increase profits by 20 percent over Year 1€™s budget of $26,750. According to your budget, are profits expected to increase by 20 percent? Why or whynot?

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Revenues (100,000 units) Manufacturing Costs: $725,000 Materials Variable Costs Fixed Costs (excluding depreciation) Depreciation (fixed) 42,000 35,600 81,900 249,750 409,250 Marketing and Administrative Costs: Marketing (variable) Depreciation of Marketing Buildings and Equipment Administrative (fixed) (excluding depreciation) Administrative Depreciation $105,600 37,400 127,300 18,700 289,000 698,250 S 26,750 Total Costs Operating Profits