Mega Corporation reported the following year end information for 2008:
|
Sales (100,000)
|
$250,000
|
|
Less: Cost of Goods sold
|
150,000
|
|
Gross profit
|
100,000
|
|
Operating expenses
|
|
|
(includes 10,000 of depreciation)
|
60,000
|
|
Operating income
|
40,000
|
Mega is developing the budget for 2009. In 2009 the company would like to increase selling prices by 15% and as a result expects a decrease in sales volume of 8%. Mega is looking to use the Kaizen approach to budgeting in 2009. Under the kaizen approach, cost of goods sold and variable operating expenses would be budgeted to decline by one percent without considering any changes in sales. Other than depreciation, all operating costs are variable.
A) Prepare a budgeted income statement for 2009
B) Should mega change the selling price?