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Budget income statement one of the decision that help manager to make decision to
accept the forecast analysis to increase profit in future. To make decision, manager looks two
forecasting that may be short term and long terms. For example, Lilliput Company has following
data and assume this expected result will following in coming year such as January, February
Lilliput Company
Income Statement
For monts ended december
The manager found these net incomes if they accept the alternatives plan as follows:
From the data, net income of January 2016, February 2016, and March 2016 are $102500,
For short term plan, I believe manager should not accepted the alternative proposed plan because
it gives loss in profit of the organization among January, February and March than they accepted
the previous forecast where they have 244,000 net income profit in each months.
However, if they look for long term beyond the given month (March 2016) and assume
that sales increase by 10% in each months with other data remaining same then they must
accepted the alternatives plans. Because, Net Income after March is increased by 16883.5
Reference
Wild, J. & Shaw, K. (2012). Managerial Accounting. Columbia. Univ. of MI. ISBN-13-978-
0078110849