13-38. Prepare Budgeted Financial Statements 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.

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