All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume
Question:
All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to fall by 5 percent, but prices are expected to rise by 15 percent. Material costs per unit are expected to increase by 12 percent. Other unit variable manufacturing costs are expected to decrease by 10 percent per unit. Fixed cash costs are expected to increase by 4 percent. Variable marketing costs will change with unit volume. Administrative cash costs are expected to increase by 5 percent. Inventories are kept at zero. Pepper Products operates on a cash basis.
INFORMATION AVAILABLE FOR YEAR 1 FOR PEPPER PRODUCTS
Sales Revenue (200,000) units…. $2,850,000
Manufacturing Costs
Materials $168,000
Variable Cash Costs 142,400
Fixed Cash Costs 327,600
Depreciation (fixed) 999,000
Marketing and Administrative Costs
Marketing (variable, cash) 422,400
Marketing depreciation 149,600
Administrative (fixed, cash) 509,200
Administrative depreciation 74,800
Total Costs $2,793,000
Operating Profits $ 57,000
Prepare a budged income statement for year 2.