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Merline Manufacturing makes its product for $50 per unit and sells it for $140 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows

MERLINE MANUFACTURING Income Statement For Month Ended December 31, 2015
Sales	$	1,400,000
Cost of goods sold		500,000
Gross profit		900,000
Operating expenses
Sales commissions (10%)		140,000
Advertising		220,000
Store rent		25,000
Administrative salaries		45,000
DepreciationOffice equipment		55,000
Other expenses		13,000
Total expenses		498,000
Net income	$	402,000

Management expects Decembers results to be repeated in January, February, and March of 2016 without any changes in strategy. Management, however, has an alternative plan. It believes that unit sales will increase at a rate of 10% each month for the next three months (beginning with January) if the item's selling price is reduced to $125 per unit and advertising expenses are increased by 25% and remain at that level for all three months. The cost of its product will remain at $50 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the sam

MERLINE MANUFACTURING Budgeted Sales For Months of January, February, and March, 2016 January February March Budgeted sales (in units) Budgeted selling price per unit Budgeted sales (in dollars) MERLINE MANUFACTURING Budgeted Income Statement For Months of January, February, and March, 2016 January February March Sales Cost of goods sold Gross profit Expenses Sales commissions Advertising Store rent Administrative salaries DepreciationOffice equipment Other expenses Total expenses 0 0 0 $0 $0 $0

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