Question

The chapter 22 team discussion problem is presented below.

• If your team has three members, complete part 1 only; each team member should prepare a budgeted income statement for a different month (April, May, or June).
• If your team has four members, complete parts 1 and 2; the first three team members will complete part 1 (April, May, and June, respectively), and the fourth team member will complete part 2.

The problem is reproduced below.

• For full credit on part 1: present the budgeted income statement for your month neatly, and show all calculations for your Sales and Cost of Goods Sold figures.
• For full credit on part 2: your recommendation should be a professional-quality full paragraph of 3-4 sentences.

IMPORTANT INSTRUCTIONS:

1. Navigate to your Group Homepage and use your Group's Announcement tool to decide among your teammates who will work on which parts (budgeted income statements for April, May, and June in part 1, and -- if your team has a fourth member -- the recommendation letter in part 2).

2. Once your roles are agreed, post your solutions in your group's Discussion forum. Be sure to clearly label your answer, indicating which part you are answering.

3. In teams that have 4 members, note that the person who completes part 2 will need to have access to the solutions to part 1 before they can complete their recommendation. Accordingly, the deadline for completing part 2 is 24 hours after the initial submission deadline.

4. For full credit, be sure to comment constructively on your teammates' posts.

CHAPTER 22 TEAM DISCUSSION PROBLEM

Kodiak Office Furniture expects second-quarter 2020 sales of its 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 40 desk units (sales price of $1,250) and 20 chairs (sales price of $500).

Kodiak Office Furniture Income Statement For Quarter Ended March 31, 2020
Sales*	$180,000
Cost of goods sold**	115,000
Gross profit	65,000
Expenses
Sales commissions (10%)	18,000
Advertising expenses	9,000
Other fixed expenses	18,000
Total expenses	45,000
Net income	$20,000

* Revenue: (120 desks x $1,250) + (60 chairs x $500) = $150,000 + $30,000 = $180,000.

** Cost of goods sold: [variable portion = (120 desks x $750) + (60 chairs x $250)] + [fixed portion = $10,000] = $115,000.

You believe that sales will increase each month for the next three months (April, 48 desks, 32 chairs; May, 52 desks, 35 chairs; June, 56 desks, 38 chairs) if selling prices are reduced to $1,150 for desks and $450 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 $750 for desks and $250 for chairs. The sales staff will continue to earn a 10% commission, the fixed manufacturing costs will be $10,000 per month, and other fixed expenses will remain at $6,000 per month.

Required

1. Prepare budgeted income statements for each of the months of April, May, and June that show the expected results from implementing the proposed changes.

2. Use the budgeted income statements from part 1 to recommend whether Santana Rey should implement the proposed changes. Explain.

^{_{Just do JUNE}}

^{_{Please follow the same format. Thank you}}

Calculations for May:

Sales: 52 desks @ $1150 = $59,800 35 chairs @ $450 = $15,750 Total April Sales = $75,550

Variable Costs:   52 desks @ $750 = $39,000 35 chairs @ $250 = $8,750 Total Costs of Goods Sold = $47,750

Advertising: $3000 per month x 10% = $3300

Commissions: Sales of $75,550 x 10% = $7555

Fixed Expenses: $6000 per month, unchanged

	Budgeted Income Statement - May
Sales		$75,550
Cost of Goods Sold		47,750
Gross Profit		27,800
Operating Expenses
Sales Commissions	$7555
Advertising	3300
Other Fixed Expenses	6000	16,855
Income before taxes		$10,945

Answer 1

Budgeted Inome Statement-April
Particular	Amount	Amount
Sales (WN-1)	$      69,600
Less : Cost of goods sold (WN-2)	$      54,000
Gross Profit		$ 15,600
Operating Expences
Sales Commissions	$        6,960
Advertising (WN-3)	$        3,300
Other Fixed Income	$        6,000
Total Operating Expences		$ 16,260
Income Before Taxes		$     (660)

Working Note	No. of Unit	Price	Total
(1) Sales
Desks	48	$    1,150	$ 55,200
Chair	32	$        450	$ 14,400
Total			$ 69,600
Working Note	No. of Unit	Cost	Total
(2) Cost of goods sold
Desks	48	$        750	$ 36,000
Chair	32	$        250	$    8,000
Fixed Cost			$ 10,000
Total			$ 54,000

Budgeted Inome Statement-May
Particular	Amount	Amount
Sales (WN-1)	$      75,550
Less : Cost of goods sold (WN-2)	$      57,750
Gross Profit		$ 17,800
Operating Expences
Sales Commissions	$        7,555
Advertising (WN-3)	$        3,300
Other Fixed Income	$        6,000
Total Operating Expences		$ 16,855
Income Before Taxes		$        945

.

Working Note	No. of Unit	Price	Total
(1) Sales
Desks	52	$    1,150	$ 59,800
Chair	35	$        450	$ 15,750
Total			$ 75,550
Working Note	No. of Unit	Cost	Total
(2) Cost of goods sold
Desks	52	$        750	$ 39,000
Chair	35	$        250	$    8,750
Fixed Cost			$ 10,000
Total			$ 57,750

Budgeted Inome Statement-June
Particular	Amount	Amount
Sales (WN-1)	$      81,500
Less : Cost of goods sold (WN-2)	$      61,500
Gross Profit		$ 20,000
Operating Expences
Sales Commissions	$        8,150
Advertising (WN-3)	$        3,300
Other Fixed Income	$        6,000
Total Operating Expences		$ 17,450
Income Before Taxes		$    2,550

Working Note	No. of Unit	Price	Total
(1) Sales
Desks	56	$    1,150	$        64,400
Chair	38	$        450	$        17,100
Total			$        81,500
Working Note	No. of Unit	Cost	Total
(2) Cost of goods sold
Desks	56	$        750	$        42,000
Chair	38	$        250	$          9,500
Fixed Cost			$        10,000
Total			$        61,500

WN-3 Calculation of advertising expences.

As given advertising expences increase by 10% compare to last quarter i.e. march quarter $9,000 so monthly $9,000 / 3 = $3,000 and increase 10% of it so $3,000 x 10% so new monthly advertising expences will be $3,300.

Conclusion : Profit of june quarter with new policy is April + may + June = $(660) + $945 + $2,550 = $2,835.

If we compare the new policy with old one then june quarter's profit decrease by $17,165 i.e ($20,000 - $2,835) so new policy not viable but if company want to increase market share, So company's policy is better as in last month of quarter means in June company's sales in forcasted quantity will be near to half of preavious quarter.

If any other require any help related to this que. then comment i will help you.