Question

The following information is available for year 1 for Pepper Products:

  

Sales revenue (180,000 units)	$	3,240,000
Manufacturing costs
Materials	$	191,000
Variable cash costs		162,000
Fixed cash costs		373,000
Depreciation (fixed)		1,138,000
Marketing and administrative costs
Marketing (variable, cash)		481,000
Marketing depreciation		171,000
Administrative (fixed, cash)		582,000
Administrative depreciation		85,000
Total costs	$	3,183,000
Operating profits	$	57,000

   
All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to fall by 7 percent, but prices are expected to rise by 18 percent. Material costs per unit are expected to increase by 14 percent. Other unit variable manufacturing costs are expected to decrease by 6 percent per unit. Fixed cash costs are expected to increase by 6 percent.

  

Variable marketing costs will change with unit volume. Administrative cash costs are expected to increase by 7 percent. Inventories are kept at zero. Pepper Products operates on a cash basis.

Required:

Prepare a budgeted income statement for year 2. (Do not round intermediate calculations.)

PEPPER PRODUCTS
? Budgeted Income Statement
      For Year 2

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Manufacturing Costs:
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???	???
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Total Manufacturing Costs	$
Marketing and administrative costs:
???	???
???	???
???	???
???	???
???	???
Total marketing and administrative costs	$
Total Costs	$
????	????

Answer 1

Assume changes is done on year basis like first year on current year basis & second year on first year basis
		Budgeted
	Present	one year	second year
Sales revenue (180,000 units)	32,40,000.00	35,55,576.00	39,01,889.10
Manufacturing Costs:
Materials	1,91,000.00	2,02,498.20	2,14,688.59
Variable cash costs	1,62,000.00	1,41,620.40	1,23,804.55
Fixed cash costs	3,73,000.00	3,95,380.00	4,19,102.80
Depreciation (fixed)	11,38,000.00	11,38,000.00	11,38,000.00
Total Manufacturing Costs	18,64,000.00	18,77,498.60	18,95,595.95
Marketing and administrative costs:
Marketing (variable, cash)	4,81,000.00	4,47,330.00	4,16,016.90
Marketing depreciation	1,71,000.00	1,71,000.00	1,71,000.00
Administrative (fixed, cash)	5,82,000.00	6,22,740.00	6,66,331.80
Administrative depreciation	85,000.00	85,000.00	85,000.00
Total marketing and administrative costs*	13,19,000.00	13,26,070.00	13,38,348.70
Total Costs	31,83,000.00	32,03,568.60	32,33,944.65
Operating profit	57,000.00	3,52,007.40	6,67,944.46
	1 year	2nd year
Sales per unit	18	21.24
Rise by 18%	3.24	3.8232
New price	21.24	25.0632
Sales unit	180000	167400
Fall by 7%	12600	11718
New unit	167400	155682
Material Present per unit	1.06	1.21
Increase by 14%	0.15	0.17
New price	1.21	1.38
Variable manufacturing cost	0.9	0.846
Decrease by 6%	0.054	0.05076
New rate	0.846	0.79524
Fixed cash costs	3,73,000	3,95,380
Increae by 6%	22380	23722.8
new cost	3,95,380	4,19,103
Marketing (variable, cash)	2.67	2.67
new unit	167400	155682
New cost	4,47,330.00	4,16,016.90
Administrative (fixed, cash)	582000	622740
increase by 7%	40740	43591.8
New cost	622740	666331.8