Shaner Company prepared the following budgeted income statement for the first quarter of 2016:
Shaner Company is considering two options. Option 1 is to increase advertising by $900 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 15% but will provide a better product at the same sales price. The marketing manager projects either option will result in sales increases of 25% per month rather than 20%.
1. Prepare budgeted income statements for both options, assuming January sales remain $5,000. Round all calculations to the nearest dollar.
2. Which option should Shaner choose? Explain your reasoning.

  • CreatedJune 15, 2015
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