Prepare a budgeted Income Statement.
Mattingly Corporation sells a single product for $150 per unit. Total sales were 6,000 units. The company is considering a 10 percent price reduction in order to stay competitive. It is estimated that such a reduction will increase sales volume by 10 percent. Assume a 40 percent tax rate. Costs are budgeted as follows:
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Direct material
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$30 per unit
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Direct labor
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$20 per unit
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Variable manufacturing overhead
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$15 per unit
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Variable selling and administrative
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$10 per unit
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Fixed manufacturing overhead
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$100,000
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Fixed selling and administrative
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$80,000
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Required:
Prepare a budgeted income statement for next year assuming that the company reduces prices as planned.