Problem 1: Cycle-1 is a fast-growing start-up firm that manufactures bicycles. The following income statement is available for October:
Sales revenue (300 units @ $600 per unit) $180,000
Less Manufacturing costs
Variable costs 26,000
Depreciation (fixed) 27,540
Marketing and administrative costs
Fixed costs (cash) 67,500
Depreciation (fixed) 22,860
Total costs $143,900
Operating profits $36,100
Sales volume is expected to increase by 20 percent in November, but the sales price is expected to fall 10 percent. Variable manufacturing costs are expected to increase by 4 percent per unit in November. In addition to these cost changes, variable manufacturing costs also will change with sales volume. Marketing and administrative cash costs are expected to increase by 8 percent.
Cycle-1 operates on a cash basis and maintains no inventories. Depreciation is fixed and should remain unchanged over the next three years.
Required: Make a budgeted income statement for November?
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