Problem 21-3A (Part Level Submission) Marsh Industries had sales in 2013 of $7,5
ID: 2424886 • Letter: P
Question
Problem 21-3A (Part Level Submission)
Marsh Industries had sales in 2013 of $7,552,000 and gross profit of $1,298,000. Management is considering two alternative budget plans to increase its gross profit in 2014.
Plan A would increase the selling price per unit from $9.44 to $9.91. Sales volume would decrease by 10% from its 2013 level. Plan B would decrease the selling price per unit by $0.59. The marketing department expects that the sales volume would increase by 177,000 units.
At the end of 2013, Marsh has 47,200 units of inventory on hand. If Plan A is accepted, the 2014 ending inventory should be equal to 5% of the 2014 sales. If Plan B is accepted, the ending inventory should be equal to 59,000 units. Each unit produced will cost $2.12 in direct labor, $1.48 in direct materials, and $1.42 in variable overhead. The fixed overhead for 2014 should be $2,236,100.
(a)
Prepare a sales budget for 2014 under each plan.
Problem 21-3A (Part Level Submission)
Marsh Industries had sales in 2013 of $7,552,000 and gross profit of $1,298,000. Management is considering two alternative budget plans to increase its gross profit in 2014.
Plan A would increase the selling price per unit from $9.44 to $9.91. Sales volume would decrease by 10% from its 2013 level. Plan B would decrease the selling price per unit by $0.59. The marketing department expects that the sales volume would increase by 177,000 units.
At the end of 2013, Marsh has 47,200 units of inventory on hand. If Plan A is accepted, the 2014 ending inventory should be equal to 5% of the 2014 sales. If Plan B is accepted, the ending inventory should be equal to 59,000 units. Each unit produced will cost $2.12 in direct labor, $1.48 in direct materials, and $1.42 in variable overhead. The fixed overhead for 2014 should be $2,236,100.
Explanation / Answer
A
B
C
D
E
F
G
H
I
J
4
2013
2014 (Plan A)
2015 (Plan b)
2013
2014 (Plan A)
2015 (Plan b)
5
Sales volume
800000
720000
977000
Sales volume
F7/F6
F5*(100%-10%)
F5+177000
6
Selling price per unit
9.44
9.91
8.85
Selling price per unit
9.44
9.91
F6-0.59
7
Sales
7552000
7135200
8646450
Sales
7552000
G6*G5
H5*H6
8
Variable cost
4016000
3614400
4904540
Variable cost
F5*F13
G5*G13
H5*H13
9
Fixed cost
2718000
22,01,849
22,90,010
Fixed cost
F8-F10
G5*G25
H5*H25
10
Profit
1298000
13,18,951
14,51,900
Profit
1298000
G7-G8-G9
H7-H8-H9
11
12
13
Variable cost per unit
5.02
5.02
5.02
Variable cost per unit
SUM(F14:F16)
SUM(G14:G16)
SUM(H14:H16)
14
Direct Material
1.48
1.48
1.48
Direct Material
1.48
1.48
1.48
15
Direct Labour
2.12
2.12
2.12
Direct Labour
2.12
2.12
2.12
16
Variable O/H
1.42
1.42
1.42
Variable O/H
1.42
1.42
1.42
17
18
19
20
Fixed cost
2236100
2236100
Fixed cost
2236100
2236100
21
Opening stock
47200
36000
Opening stock
F23
G23
22
Sales
800000
720000
977000
Sales
F5
G5
H5
23
Closing stock
47200
36000
59000
Closing stock
47200
G5*5%
59000
24
Production
731200
954000
Production
G21+G22-G23
H21+H22-H23
25
Fixed cost absorption rate
3.06
2.34
Fixed cost absorption rate
G20/G24
H20/H24
A
B
C
D
E
F
G
H
I
J
4
2013
2014 (Plan A)
2015 (Plan b)
2013
2014 (Plan A)
2015 (Plan b)
5
Sales volume
800000
720000
977000
Sales volume
F7/F6
F5*(100%-10%)
F5+177000
6
Selling price per unit
9.44
9.91
8.85
Selling price per unit
9.44
9.91
F6-0.59
7
Sales
7552000
7135200
8646450
Sales
7552000
G6*G5
H5*H6
8
Variable cost
4016000
3614400
4904540
Variable cost
F5*F13
G5*G13
H5*H13
9
Fixed cost
2718000
22,01,849
22,90,010
Fixed cost
F8-F10
G5*G25
H5*H25
10
Profit
1298000
13,18,951
14,51,900
Profit
1298000
G7-G8-G9
H7-H8-H9
11
12
13
Variable cost per unit
5.02
5.02
5.02
Variable cost per unit
SUM(F14:F16)
SUM(G14:G16)
SUM(H14:H16)
14
Direct Material
1.48
1.48
1.48
Direct Material
1.48
1.48
1.48
15
Direct Labour
2.12
2.12
2.12
Direct Labour
2.12
2.12
2.12
16
Variable O/H
1.42
1.42
1.42
Variable O/H
1.42
1.42
1.42
17
18
19
20
Fixed cost
2236100
2236100
Fixed cost
2236100
2236100
21
Opening stock
47200
36000
Opening stock
F23
G23
22
Sales
800000
720000
977000
Sales
F5
G5
H5
23
Closing stock
47200
36000
59000
Closing stock
47200
G5*5%
59000
24
Production
731200
954000
Production
G21+G22-G23
H21+H22-H23
25
Fixed cost absorption rate
3.06
2.34
Fixed cost absorption rate
G20/G24
H20/H24
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