Help: Serial Problem Success Systems Adria Lopez expects second quarter 2014 sal

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Help: Serial Problem Success Systems

Adria Lopez expects second quarter 2014 sales of her new line of computer furniture to be the same as the first quarter's sales (reported below) without any changes in strategy. Monthly sales averaged 44 desk units (sales price of $1,310) and 26 chairs (sales price of $560) SUCCESS SYSTEMS Segment Income Statement For Quarter Ended March 31, 2014 Salest Cost of goods sold $ 216,600 162,900 Gross profit Expenses Sales commissions (10%) Advertising expenses Other fixed expenses 53,700 21,660 10,800 19,800 Total expenses 52,260 Net income $1,440 * Reflects revenue and expense activity only related to the computer furniture segment. t Revenue: (132 desks x $1,310)+ (78 chairs x $560) $172,920 $43,680 - $216,600 t Cost of goods sold: (132 desksx $810) (78 chairs x $310)+ $31,800- $162,900 Adria Lopez believes that sales will increase each month for the next three months (April, 52 desks, 38 chairs; May, 56 desks, 41 chairs; June, 60 desks, 44 chairs) if selling prices are reduced to $1,210 for desks and $510 for chairs, and advertising expenses are increased by 10% and remain at that level for all three months. The products' variable cost will remain at $810 for desks and $310 for chairs. The sales staff will continue to earn a 10% commission, the fixed manufacturing costs per month will remain at $10,600 and other fixed expenses will remain at $6,600 per month

Explanation / Answer

Solution:

SUCCESS SYSTEMS Budegeted Income Statements For the Months of April, May and June April May June Operating Revenue: Sales $82,300 $88,670 $95,040 Cost of goods sold $53,900 $58,070 $62,240 Gross profit
Gross Profit = Net Sales - Cost of Goods Sold $28,400 $30,600 $32,800 Expenses: Sales commissions (10% on Sales) $8,230 $8,867 $9,504 Advertising expenses remain same for all months $10,600 $10,600 $10,600 Other fixed expenses remain same for all months $6,600 $6,600 $6,600 Total expenses $25,430 $26,067 $26,704 Net income = Gross Profit - Total Expenses $2,970 $4,533 $6,096 Calculation of Sales: April May June 52*510=62920 56*1210=67760 60*1210=72600 38*510=19380 41*510=20910 44*510=22440 Total = 82,300 Total = 88,670 Total = 95,040 Calculation of Cost of Goods Sold: April May June 52*810=42120 56*810=45360 60*810=48600 38*310=11780 41*310=12710 44*310=13640 Total = 53,900 Total = 58,070 Total = 62,240

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