Purpose a budgeted income statement

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Reference no: EM139965

Mega Corporation reported the following year end information for 2008:

Sales (100,000)

$250,000

Less: Cost of Goods sold

150,000

Gross profit

100,000

Operating expenses

 

(includes 10,000 of depreciation)

60,000

Operating income

40,000

Mega is developing the budget for 2009.  In 2009 the company would like to increase selling prices by 15% and as a result expects a decrease in sales volume of 8%.  Mega is looking to use the Kaizen approach to budgeting in 2009.  Under the kaizen approach, cost of goods sold and variable operating expenses would be budgeted to decline by one percent without considering any changes in sales.  Other than depreciation, all operating costs are variable.

A)  Prepare a budgeted income statement for 2009

B)  Should mega change the selling price?

Reference no: EM139965

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