Prepare a budgeted income statement for Ever Last Ovenware for 2007 if the engineers' redesign efforts had worked as originally planned. Use these assumptions:
a. First quarter sales of 1,500,000 units will be achieved each quarter in 2007.
b. The selling price for 2007 will remain 10% below the price charged from 2002-2006, and there were no sales price increases during the 2002-2006 period.
c. Variable cost of goods sold averaged about $5.55 per unit of ovenware from 2002-2006.
d. Variable production costs will be reduced by 35% due to the new design.
e. The fixed cost of production in 2006 contained one-time, increased costs (about $4,000,000) for the design changes. For 2007, fixed costs are expected to be about 3.5% higher than 2005.
f. Marketing costs contain both fixed and variable elements, however, it is budgeted based on spending 7% of expected sales revenue.
g. Other fixed costs are expected to increase about 2.5% over 2006.
Would the product manager have met his profit target of 25% return on sales in 2007 for the product line with the redesign?