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ok int frences Merline Manufacturing makes its product for $75 per unit and sells it for $150 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, 2019. Sales Cost of goods sold Gross profit Operating expenses Sales commissions (108) Advertising Store rent Administrative salaries Depreciation-office equipment Other expenses Total expenses Net income $2,250,000 1,125,000 1,125,000 Management expects December's results to be repeated in January, February, and March of 2020 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 15% and remain at that level for all three months. The cost of its product will remain at $75 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the same. 225,000 250,000 30,000 45,000 50,000 10,000 610,000 $ 515,000 Required: 1. Prepare budgeted income statements for each of the months of January, February, and March that show the expected results from implementing the proposed changes. 2. Is net income for March expected to increase with the proposed strategy changes? Required 1 Complete this question by entering your answers in the tabs below. Required 2

from implementing the proposed changes. (Enter your final answers in whole dollars.) Budgeted sales (in dollars) Expenses MERLINE MANUFACTURING Budgeted Sales For Months of January, February, and March, 2020 January February MERLINE MANUFACTURING Budgeted Income Statement For Months of January, February, and March, 2020 January February Sales commissions Total expenses Advertising Store rent Administrative salaries Depreciation Office equipment Other expenses < Required 1 March March Required 2 >

Required 1 Required 2 Is net income for March expected to increase with the proposed strategy changes? Is net income for March expected to increase with the proposed strategy changes? < Required 1 Required 2 >