The operating results in summarized form for a retail computer store for 2018 are: Revenue:

The operating results in summarized form for a retail computer store for 2018 are:


                        Hardware sales                                 $4,800,000

                        Software sales                                                  2,000,000

                        Maintenance contracts                       1,200,000

                        Total revenue                                     $8,000,000

                        Costs and expenses:                          

                        Cost of hardware sales                     $3,360,000

                        Cost of software sales                                     1,200,000

                        Marketing expenses                               600,000

                        Customer maintenance costs                            640,000

                        Administrative expenses                    1,120,000

Total costs and expenses                  $6,920,000

                        Operating income                             $1,080,000

The computer store is in the process of formulating its operating budget for 2019 and has made the following assumptions:

·      The selling prices of hardware are expected to increase 10 percent but there will be no selling price increases for software and maintenance contracts. 

·      Hardware unit sales are expected to increase 5 percent with a corresponding 5 percent growth in the number of maintenance contracts; growth in unit software sales is estimated at 8 percent.

·      The cost of hardware and software is expected to increase 4 percent.

·      Marketing expenses will be increased 5 percent in the coming year.

·      Three technicians will be added to the customer maintenance operations in the coming year, increasing the customer maintenance costs by $120,000.

·      Administrative costs will be held at the same level.

Compute the computer retail store’s budgeted operating income for 2019.