Pendleton Company, a merchandising company, is developing its master budget for 2015. The income statement for 2014 is as follows:
Gross sales $750,000
Less estimated uncollectible accounts (7,500)
Net sales 742,500
Cost of goods sold (430,000)
Gross profit 312,500
Operating expenses (including $25,000 depreciation) (200,500)
Net income $112,000
The following are management's goals and forecasts for 2015:
1. Selling prices will increase by 6 percent, and sales volume will increase by 4 percent.
2. The cost of merchandise will increase by 3 percent.
3. All operating expenses are fixed and are paid in the month incurred. Price increases for operating expenses will be 10 percent. The company uses straight-line depreciation.
4. The estimated uncollectibles are 2 percent of budgeted sales.
REQUIRED: Prepare a budgeted functional income statement for 2015.
