Allscott Company Is Developing Its Budgets for 2016 And,for the First

question 68

Essay

Allscott Company is developing its budgets for 2016 and,for the first time,will use the kaizen approach.The initial 2016 income statement,based on static data from 2015,is as follows:
$\begin{array}{lr}\text { Sales (140,000 units) } & \$ 420,000 \\\text { Less: Cost of goods sold } & 280,000\\\text { Gross margin } & 140,000 \\\text { Operating expenses (includes } \$ 28,000 \text { of depreciation) } & \underline{112,000}\\\text { Net income }&\$28,000\end{array}$ Selling prices for 2016 are expected to increase by 8%,and sales volume in units will decrease by 10%.The cost of goods sold as estimated by the kaizen approach will decline by 10% per unit.Other than depreciation,all other operating costs are expected to decline by 5%.
Required:
Prepare a kaizen-based budgeted income statement for 2016.

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Definitions:

Economics

The social science that analyses the production, distribution, and consumption of goods and services.

Arbitrary

Stemming from a random selection or personal impulse instead of being guided by any logical rationale or structured approach.

Representation

The act of speaking or acting on behalf of someone or the depiction of something in art or literature.

Symbol

A symbol is a mark, sign, or word that indicates, signifies, or is understood as representing an idea, object, or relationship.