I have seen two different calculations for #3. One that equals 4,200,000 (4,000,000*1.05) and another that equals 4,452,000 (4,000,000*5% + 4,200,000*6%). I am unsure as to which calculation is correct.

Prepare a budget. Using the information provided below, determine the budgeted revenue and expense items for your company for 2022. The companys annual income statement for 2021, which is used as a basis for preparing the 2022 budget, is below (shown in thousands):

Additional information to be used in preparing the budget for 2022 are as follows:

1. Selling prices of equipment are expected to increase by 10% as the economic recovery begins. The selling price of each maintenance contract is expected to remain unchanged from 2021.

2. Equipment sales in units are expected to increase by 6%, with a corresponding 6% growth in units of maintenance contracts.

3. Cost of each unit sold is expected to increase by 5% to pay for the necessary technology and quality improvements.

4. Marketing costs are expected to increase by $290,000, but administration costs are expected to remain at 2021 levels.

5. Distribution costs vary in proportion to the number of units of equipment sold.

6. Two maintenance technicians are to be hired at a total cost of $160,000, which covers wages and related travel costs. The objective is to improve customer service and shorten response time. 7. There is no beginning or ending inventory of equipment.

Here is what I have so far...

Company's Annual Income Statement For the year 2021 Revenues \begin{tabular}{|l|r|r} \hline Equipment & 9,328,000 & \\ \hline Maintenance Contracts & 2,014,000 & \\ \hline Total Revenues & & 11,342,000 \\ \hline Cost of Goods Sold & & 4,200,000 \\ \hline Gross Margin & & 7,142,000 \\ \hline Operating Costs & & \\ \hline Marketing & 920,000 & \\ \hline Distribution & 106,000 & \\ \hline Customer Maintenance & 1,260,000 & \\ \hline Administration & 920,000 & \\ \hline Total Operating Costs & & 3,206,000 \\ \hline Operating Income & & 3,936,000 \\ \hline \hline \end{tabular} Company's Annual Income Statement For the year 2021 Revenues \begin{tabular}{|l|r|r} \hline Equipment & 9,328,000 & \\ \hline Maintenance Contracts & 2,014,000 & \\ \hline Total Revenues & & 11,342,000 \\ \hline Cost of Goods Sold & & 4,200,000 \\ \hline Gross Margin & & 7,142,000 \\ \hline Operating Costs & & \\ \hline Marketing & 920,000 & \\ \hline Distribution & 106,000 & \\ \hline Customer Maintenance & 1,260,000 & \\ \hline Administration & 920,000 & \\ \hline Total Operating Costs & & 3,206,000 \\ \hline Operating Income & & 3,936,000 \\ \hline \hline \end{tabular}