Olivas International, Inc., is an exotic car dealership. Suppose that its Los Angeles office projects that 2007

Question:

Olivas International, Inc., is an exotic car dealership. Suppose that its Los Angeles office projects that 2007 quarterly sales will increase by $3 \%$ in quarter 1 , by $4 \%$ in quarter 2 , by $6 \%$ in quarter 3 , and by $5 \%$ in quarter 4. Management expects operating expenses to be $80 \%$ of revenues during each of the first two quarters, $79 \%$ of revenues during the third quarter, and $81 \%$ during the fourth. The office manager expects to borrow $\$ 100,000$ on July 1, with quarterly principal payments of $\$ 10,000$ beginning on September 30 and interest paid at an annual rate of $13 \%$. Assume that fourth-quarter 2006 sales were $\$ 4,000,000$.

Prepare a budgeted income statement for each of the four quarters of 2007 and for the entire year. Present the 2007 budget as follows: