Reference no: EM132574761
Question - Gulf States Manufacturing has the following data from year 1 operations, which are to be used for developing year 2 budget estimates:
Sales revenues (15,000 units) $1,350,000
Manufacturing costs Materials $241,000
Variable cash costs 329,000
Fixed cash costs 132,000
Depreciation (fixed) 162,000
Marketing and administrative costs Marketing (variable, cash) 172,000
Marketing depreciation 42,000
Administrative (fixed, cash) 168,000
Administrative depreciation $15,000
Total costs $1,261,000
Operating profits $89,000
All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $15,850 will be replaced in year 2 with new equipment that will incur an annual depreciation charge of $22,300. Sales volume and prices are expected to increase by 13 percent and 7 percent, respectively. On a per-unit basis, expectations are that materials costs will increase by 11 percent and variable manufacturing costs will decrease by 2 percent. Fixed cash manufacturing costs are expected to decrease by 8 percent.
Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 9 percent. Inventories are kept at zero. Gulf States operates on a cash basis.
Required - Prepare a budgeted income statement for year 2.