Problem 23-3A (Part Level Submission) Hill Industries had sales in 2016 of $6,96

Question

Problem 23-3A (Part Level Submission) Hill Industries had sales in 2016 of $6,960,000 and gross profit of $1,265,000. 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 0% from, its 2016 level. Plan B would decrease the selling price per units. At the end of 2016, Hill has 47,000 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 66,000 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 $1,358,000

Explanation / Answer

Ans)

Plan A Plan B

Expected unit sales 783,000* 989,000**

Unit Selling price 8.4 7.5

Total sales 6577200 7417500

*6960000 / 8 = 870,000 units

870,000 X 90% = 783,000

870,000 + 119,000 = 989,000

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