36.    Master budget profit plan. Floral Products, Inc., has the following data from Year 1 operations, which are to be used for developing Year 2 budget estimates:

 

Revenues (100,000 units)...............................................................................................                                                     $746,000

 

Manufacturing Costs:

Materials  .........................................................................................................................                         $133,000

Variable Costs ................................................................................................................                          180,900 Fixed Costs  (excluding  depreciation) ......................................................................                                         72,000

Depreciation  (fixed).....................................................................................................                         89,000       474,900

 

                     

Marketing and Administrative Costs:

 

Marketing  (variable) ....................................................................................................	$ 95,000	Â
Depreciation of Marketing Building and Equipment............................................	22,600
Administrative  (fixed)  (excluding  depreciation) ..................................................	90,110
Depreciation of Administrative Building and Equipment ...................................	8,400	Â	216,110
Total  Costs ..........................................................................................................................	Â	Â	691,010
Operating  Profits ...............................................................................................................	Â	Â	$ 54,990

 

 

All depreciation costs are  fixed.  Sales  volume  and  prices  are  expected  to  increase by 12 percent and 6 percent, respectively. On a per-unit basis, expectations are that materials costs  will  increase  by  10  percent  and  variable  manufacturing  costs  will  decrease  by 4 percent. Fixed manufacturing costs are expected to decrease by 7 percent.

Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 8  percent.

Prepare a master budget profit plan for Year 2. Use a format similar to the one shown in Exhibit 9.7. Management wants to increase operating profits by 20 percent over Year 1’s

$54,990 expected profits. Based on your budget for Year 2, are profits expected to increase by 20 percent? Why or why  not?