Dalley Inc All Depreciation Charges Are Fixed and Are Expected to Remain

question 41

Essay

Dalley Inc.has the following information for its first year of operations: $\begin{array}{|l|r|}\hline \text { Revenues (200,000 units) } &\underline{ \$ 2,900,000} \\\hline \text { Manufacturing costs: } & \\\hline \text { Materials } & \$ 168,000 \\\hline \text { Variable cash costs } & 142,400 \\\hline \text { Fixed cash costs } & 327,600 \\\hline \text { Depreciation (fixed) } & 999,000 \\\hline \text { Marketing \& administrative costs: } & \\\hline \text { Marketing (uariable) } & \$ 22,400 \\\hline \text { Marketing depreciation } & 149,600\\\hline \text { Administrative (fixed) } &509,200 \\\hline \text { Administrative depreciation } &\underline{ 74,800} \\\hline \text { Total costs } & \$ 2,793,000 \\\hline \text { Operating profits } &\underline{ \$ 107,000} \\\hline\end{array}$


All depreciation charges are fixed and are expected to remain the same for year 2.Sales volume is expected to increase by 15%,but marketing prices are expected to fall by 4%.Material costs per unit are expected to decrease by 6%.Other unit variable manufacturing costs are expected to decrease by 2.5% per unit.Fixed manufacturing costs (other than depreciation)are expected to increase by 6%.Variable marketing costs per unit will remain constant.Administrative costs (other than depreciation)are expected to increase by 10%.Assume there are no inventories.Dalley operates on a cash basis.Required:
Prepare a budgeted income statement for year 2.

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Definitions:

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price.

Demand Schedule

a table that shows the quantity of a good or service that consumers are willing and able to purchase at various price points.

Quantities

The amounts or numbers of a material or item available or required.

Various Prices

Describes a market scenario where identical or similar goods or services are sold at different price points.