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Merline Manufacturing makes its product for $60 per unit and sells it for $130 per unit. The sales staff receives a 10% commission on the sale of each unit. Its December income statement follows.

MERLINE MANUFACTURING Income Statement For Month Ended December 31, 2015
Sales	$	1,300,000
Cost of goods sold		600,000
Gross profit		700,000
Operating expenses
Sales commissions (10%)		130,000
Advertising		200,000
Store rent		24,000
Administrative salaries		40,000
DepreciationOffice equipment		50,000
Other expenses		12,000
Total expenses		456,000
Net income	$	244,000

Management expects Decembers results to be repeated in January, February, and March of 2016 without any changes in strategy. Management, however, has an alternative plan. It believes that unit sales will increase at a rate of 10% each month for the next three months (beginning with January) if the item's selling price is reduced to $115 per unit and advertising expenses are increased by 25% and remain at that level for all three months. The cost of its product will remain at $60 per unit, the sales staff will continue to earn a 10% commission, and the remaining expenses will stay the same.

Required:

Prepare budgeted income statements for each of the months of January, February, and March that show the expected results from implementing the proposed changes.

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