Profit Planning of the Alcatel Mobile Phone Corporation

Profit Planning via Income Statement. The controller of the Alcatel Mobile Phone Corporation presented the following income statement for the year ending June 30, 19A to the board of directors:

Sales                                                            $12,000,000
Cost of goods sold:
Direct materials                      $3,800,000
Direct labor                             2,900,000
Factory overhead                     2,450,000        9,150,000
Gross profit                                                   $ 2,850,000
Commercial expenses :
Marketing expenses               $1,350,000
Administrative expenses           1,000,000         2,350,000
Net income                                                       $ 500,000

The board discussed the ratio of net income to sales and decided that for the year 19B an increase of at least 25% of the present profit was desirable. While the sales volume is expected to increase about 20%, all costs and expenses point to considerable advances in costs; e.g., direct materials up 8%; direct labor up 10%; factory overhead up 3%; marketing expenses up 4%; and administrative expenses up 2%. The 3% increase of factory overhead applies to the variable overhead only. Fixed factory overhead is considered to remain at the present level of $1,250,000. Volume will not cause an increase in marketing and administrative expenses. Ignore income tax.

Required: (1) A forecast income statement for the year 19B incorporating all cost increases as well as management's goal for a higher net income. 

(2) How much will the percentage of net income to sales change from the previous year?