The following information is available for year 1 for Dancer Components: Sales r

Question

The following information is available for year 1 for Dancer Components: Sales revenue (310,000 units) $ 6,200,000 Manufacturing costs Materials $ 365,000 Variable cash costs 309,000 Fixed cash costs 711,000 Depreciation 2,168,000 Marketing and administrative costs Marketing (variable, cash) 917,000 Marketing depreciation 325,000 Administrative (fixed, cash) 1,106,000 Administrative depreciation 162,000 Total costs $ 6,063,000 Operating profits $ 137,000 All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to increase by 17 percent, but prices are expected to fall by 4 percent. Material costs per unit are expected to decrease by 7 percent. Other unit variable manufacturing costs are expected to decrease by 2 percent per unit. Fixed manufacturing cash costs are expected to increase by 4 percent. Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 9 percent. Inventories are kept at zero. Dancer operates on a cash basis. Required: Prepare a budgeted income statement for year 2. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

Explanation / Answer

Working

Sale price in 1st year = 6200000/310000

Sale price in 1st year = 20

Expected Sale Price = 20*(1-4%) = 19.20

Expected Sale Volume = 310000*(1+17%)

Expected Sale Volume = 362700

Expected Sale = 362700*19.20

Expected Sale = $ 6,963,840

Material Cost = 365000*1.17*(1-7%) = 397157

variable manufacturing costs = 309000*1.17*(1-2%) = 354299

Fixed manufacturing cash costs = 711000*(1+4%) = 739440

Variable marketing costs = 917000*1.17

Variable marketing costs = 1072890

Administrative cash costs = 1106000*1.09

Administrative cash costs = 1205540

All depreciation charges are fixed and are expected to remain the same for year 2

Budgeted Income Statement Sales revenue (362,700 units)            6,963,840 Manufacturing costs Materials                397,157 Variable cash costs                354,299 Fixed cash costs                739,440 Depreciation            2,168,000         3,658,896 Marketing and administrative costs Marketing (variable, cash)            1,072,890 Marketing depreciation                325,000 Administrative (fixed, cash)            1,205,540 Administrative depreciation                162,000         2,765,430 Total costs            6,424,326 Operating profits                539,514

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