Merline Manufacturing makes its product for $65 per unit and sells it for $131 per unit....
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Merline Manufacturing makes its product for $65 per unit and sells it for $131 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows PERLINE HANUFACTURING Income Statement For Ponth Ended December 31, 2019 Sales Cost of goods sold Gross profit Operating expenses Sales commissions (10%) Advertising Store rent Administrative salaries Depreciation-office equipment Other expenses Total expenses Net Income $1,110,000 650,000 660,000 131,000 202,000 24,100 40,500 50,500 12,100 460,200 $ 199,000 Management expects December's results to be repeated in January, February, and March of 2020 without any changes in strategy Management, however, has an alternative plan. It believes that unit sales will increase at a rate of 10% each month for the next three months (beginning with January) if the item's selling price is reduced to $116 per unit and advertising expenses are increased by 10% and remain at that level for all three months. The cost of its product will remain at $65 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the same. Required: 1. Prepare budgeted income statements for each of the months of January, February, and March that show the expected results from implementing the proposed changes. 2. Is net income for March expected to increase with the proposed strategy changes? Complete this question by entering your answers in the tabs below. Merline Manufacturing makes its product for $65 per unit and sells it for $131 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows PERLINE HANUFACTURING Income Statement For Ponth Ended December 31, 2019 Sales Cost of goods sold Gross profit Operating expenses Sales commissions (10%) Advertising Store rent Administrative salaries Depreciation-office equipment Other expenses Total expenses Net Income $1,110,000 650,000 660,000 131,000 202,000 24,100 40,500 50,500 12,100 460,200 $ 199,000 Management expects December's results to be repeated in January, February, and March of 2020 without any changes in strategy Management, however, has an alternative plan. It believes that unit sales will increase at a rate of 10% each month for the next three months (beginning with January) if the item's selling price is reduced to $116 per unit and advertising expenses are increased by 10% and remain at that level for all three months. The cost of its product will remain at $65 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the same. Required: 1. Prepare budgeted income statements for each of the months of January, February, and March that show the expected results from implementing the proposed changes. 2. Is net income for March expected to increase with the proposed strategy changes? Complete this question by entering your answers in the tabs below.
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MERLINE MANUFACTURING Budgeted Sales For Months of January February and March 2018 December Bu... View the full answer
Related Book For
Fundamental Accounting Principles
ISBN: 978-0077862275
22nd edition
Authors: John Wild, Ken Shaw, Barbara Chiappetta
Posted Date:
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