# Question

Rhodes, Inc., is a fast-growing start-up firm that manufactures bicycles. The following income statement is available for July:
Sales revenue (200 units @ \$500 per unit) . . . . . . . \$100,000
Less
Manufacturing costs
Variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,560
Depreciation (fixed) . . . . . . . . . . . . . . . . . . . . . . . . . 15,300
Marketing and administrative costs
Fixed costs (cash) . . . . . . . . . . . . . . . . . . . . . . . . . 37,560
Depreciation (fixed) . . . . . . . . . . . . . . . . . . . . . . . 12,700
Total costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$80,120
Operating profits . . . . . . . . . . . . . . . . . . . . . . . . . . . \$19,880
Sales volume is expected to increase by 20 percent in August, but the sales price is expected to fall 10 percent. Variable manufacturing costs are expected to increase by 3 percent per unit in August. In addition to these cost changes, variable manufacturing costs also will change with sales volume. Marketing and administrative cash costs are expected to increase by 10 percent.
Rhodes operates on a cash basis and maintains no inventories. Depreciation is fixed and should remain unchanged over the next three years.

Required
Prepare a budgeted income statement for August.

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