Answer:
<u>Budgeted functional income statement for 2015</u>
Gross sales ($2,000,000  × 1.04 × 1.06)                                       $2,204,800
Less: Estimated uncollectible accounts ($2,204,800 × 2 %)         ($44,096)
Net sales                                                                                        $2,160,704
Cost of goods sold (1,100,000 × 1.03)                                          ($1,133,000)
Gross profit                                                                                     $1,027,704
Operating expenses (475,000 × 1.10)                                            ($522,500)
Depreciation                                                                                     ($25,000)
Net income                                                                                       $480,204
Explanation:
Make the adjustments stated on the 2014 Income Statement.
For Operating Expenses, it is wise to first remove the depreciation expense and apply the increment of 10% to reflect Operating Costs for 2015.
Treat Depreciation Expense separately and at the same amount as for 2014, since depreciation is calculated on straight line method.