*Problem 21-3A (Part Level Submission) Hill Industries had sales in 2016 of $7,5

Question

*Problem 21-3A (Part Level Submission) Hill Industries had sales in 2016 of $7,520,000 and gross profit of $1,204,000. Management is considering two alternative budget plans to increase its gross profit in 2017 Plan A would increase the selling price per unit from $8.00 to $8.40. Sales volume would decrease by 10% from its 2016 level. Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 117,000 units. At the end of 2016, Hill has 42,000 units of inventory on hand. If Plan A is accepted, the 2017 ending inventory should be equal to 5% of the 2017 sales. If Plan B is accepted, the ending inventory should be equal to 71,000 units. Each unit produced will cost $1.80 in direct labor, $1.40 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2017 should be $1,649,000

Explanation / Answer

HILL INDUSTRIES Production Budget For the Year Ending December 31, 2017 Plan A Plan B Expected unit sales 846000 1057000 Add:   Desired ending finished goods units 42300 71000 Total required units 888300 1128000 Less: Beginning finished goods units 42000 42000 Required production units 846300 1086000

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