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  3. avery company prepared the following budgeted inco

Avery Company prepared the following budgeted income statement for the first quarter of 2016: LOADING...(Click...

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Accounting

Avery Company prepared the following budgeted income statement for the first quarter of 2016: LOADING...(Click the icon to view the budgeted income statement.) Avery is considering two options. Option 1 is to increase advertising by $ 700 per month. Option 2 is to use better-quality materials in the manufacturing process. The better materials will increase the cost of goods sold to 65% but will provide a better product at the same sales price. The marketing manager projects either option will result in sales increases of 10% per month rather than 5%. Prepare budgeted income statements for both options assuming January sales remain $ 20000. Avery Company Budgeted Income Statement For the Quarter Ended March 31, 2016 January February March Total Sales Revenue (5% increase per month) $20,000 $21,000 $22,050 $63,050 Cost of Goods Sold (60% of sales) 12,000 12,600 13,230 37,830 Gross Profit 8,000 8,400 8,820 25,220 S and A Expenses ($3,000 + 10% of sales) 5,000 5,100 5,205 15,305 Operating Income 3,000 3,300 3,615 9,915 Income Tax Expense (20% of operating income) 600 660 723 1,983 Net Income $2,400 $2,640 $2,892 $7,932

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