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Prepare budgeted income statements for both options, assuming both options begin in January and January sales remain $ 25 000. Round all calculations to the nearest dollar. Begin by preparing the budgeted income statement for Option 1.

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Avery Company Budgeted Income Statement For the Quarter Ended March 31, 2018 January February Net Sales Revenue (20% increase per month) $ 25,000 $ 30,000 $ Cost of Goods Sold (60% of sales) 15,000 18,000 Gross Profit 10,000 12,000 S and A Expenses ($2,200 + 8% of sales) 4,200 4,600 Operating Income 5,800 7,400 Income Tax Expense (10% of operating income) 580 Net Income 5,220 $ 6,660 $ March 36,000 $ 21,600 14,400 5,080 9,320 932 8,388 $ Total 91,000 54,600 36,400 13,880 22,520 2,252 20,268 740 Option 1 is to increase advertising by $1,400 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 30% per month rather than 20%. Shaner Company Budgeted Income Statement For the Quarter Ended March 31, 2018 January February March Total Sales Revenue Cost of Goods Sold Gross Profit S and A Expenses Operating Income Income Tax Expense Net Income Now prepare the budgeted income statement for Option 2. (Round all amounts to the nearest whole number.) Shaner Company Budgeted Income Statement For the Quarter Ended March 31, 2018 January February March Total Sales Revenue Cost of Goods Sold Gross Profit S and A Expenses Operating Income Income Tax Expense Net Income Requirement 2. Which option should Shaner choose? Explain your reasoning. because net income for the quarter is expected to be higher under this option. However, because both options are expected to yield net income for the quarter than the currently If one of the two options is chosen, it would be budgeted, Shaner may decide

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