ExtraC Prepare and Evaluate Budgeted Income Statement

Fairfield Stores, a retailer in a shopping mall, prepared the following income statement for its operations for the month just ended:

Sales commissions were $15\%$ of sales. Income taxes were $40\%$ of income before income taxes. Both should continue at the same rate for the remainder of the year.

Increase advertising expense by $40\%.$

Decrease all selling prices by $10\%.$

Increase the number of units sold by $25\%$ as a result of the first two changes.

a$.$ Prepare a budgeted income statement for the month of May. Round all amounts on the

income statement to the nearest dollar.

b$.$ Complete the following statement:

Fairfield's management

$,$ make the planned changes because the changes would result in a:

$x$

in net income. and the Cost of Goods Sold is not $324,000$ and Income Tax Expense is not $23,580$