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Merline Manufacturing makes its product for $$65$ per unit and sells it for $$131$ per unit. The sales staff receives a commission of $10\%$ of sales. Its December income statement follows.

MERLINE MANUFACTURING

Income Statement

For Month Ended December $31$

Sales $ $1,310,000$

Cost of goods sold $650,000$

Gross profit $660,000$

Selling, general, and administrative expenses

Sales commissions $(10\%)$ $ $131,000$

Advertising $202,000$

Office rent $24,100$

Administrative salaries $40,500$

Depreciation$$Office equipment $50,500$

Office Insurance $12,100460,200$

Net income $ $199,800$

Management expects December$$s results to be repeated in January, February, and March without any changes in strategy. Management, however, has an alternative plan. It believes that if the unit selling price is reduced to $$116$ per unit and advertising is increased to $$222,200$ per month, sales units will be $11,000$ for January, $12,100$ for February, and $13,310$ for March. The cost of its product will remain at $$65$ per unit, the sales staff will continue to earn a $10\%$ commission, and the remaining expenses will stay the same.

Required:

$1.$ Prepare budgeted income statements for each of the months of January, February, and March that show results from implementing the proposed plan.

$2.$ For the proposed plan, is income in March budgeted to be higher than income in December?

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