Serial problem SP20 Santana rey expects second quarter 2020 sales of Business Solutions line of computer furniture to be the same as the first quarter's sales without any changes in the strategy. Months sales averaged 40 desk units (sales price of $1250) and 20 chairs (sales price of $500). Business Solutions-Computer Furniture
Segment
Segment Income Statement*
For Quarter Ended March 31, 2020
Salest $180,000
Cost of goods sold 135,000
Gross profit 45,000
Expenses Sales commissions (10%) 18,000
Advertising expenses 9,000
Other fixed expenses 18,000
Total expenses 45,000
Net income $0
Reflects revenue and expense activity only related to the computer furniture segment.
Revenue: (120 desks * $1,250) + (60 chairs * $500) = $150,000+ $30,000 = $180,000 #
Cost of goods sold: (120 desks * $750) + (60 chairs * $250) + $30,000 = $135,000
Santana Rey believes that sales will increase each month for the next three months (April, 48 desks, 32 chairs; May, 52 desks, 35 chairs; June, 56 desks, 38 chairs) if selling prices are reduced to $1,150 for desks and $450 for chairs and advertising expenses are increased by 10% and remain at that level for all three months. The products' variable cost will remain at $750 for desks and $250 for chairs. The sales staff will continue to earn a 10% commission, the fixed manufacturing costs per month will remain at $10,000, and other fixed expenses will remain at $6,000 per month.
Required:
Prepare budgeted income statements for the computer furniture segment for each of the months of April, May, and June that show the expected results from implementing the proposed changes. Use a three-column format, with one column for each month.