Holly Company prepared the following budgeted income statement for the
Holly Company prepared the following budgeted income statement for the first quarter of 2016:


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 yourreasoning.
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