Question: Allscott Company is develop'lllg its budgets for 19x5 and, for the first time, will use the Kaizen approach. The initial 19x5 income statement, based on static data from 19x4, is as follows:
Sales (140,000 units)__________$420,000
Less: cost of goods sold__________280.000
Gross margin_____________$140,000
Operating expenses
(includes $28,000 of depreciation)_____112,000
Net income____________$28.000
Selling prices for 19x5 are expected to increase by 8 percent, and sales volume in units will decrease by 10 percent. The cost of goods sold as estimated by the Kaizen approach will decline by 10 percent per unit. Other than depreciation, all other operating costs are expected to decline by 5 percent.
Prepare a Kaizen-based budgeted income statement for 19x5.