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ID: 2533529 • Letter: W
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Question1 H??Industries had sales in 2016 of?6,960,000 and gross profit af $1,187,000. 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 10S% from its 2016 level. Plan B would decrease the salling price per unit by so.s0. The marketing department expects that the sales volume would increase by 110,000 units At the end of 2016, Hill has 41,000 units of inventory on hand ft Plan A s accepted, the 2017 end ng inventory should be equal to 5% of the 2017 sales r Plan B is accepted the ending inventory should be equal to 68,000 units. Each unit produced will cost $1.80 n direct labor,?1.40 in direct matenals, and $1.201n vari overhead for 2017 should be $1.883,000. able overhead. The fixed Prepare a sales budget ror 2017 under each plan. (Round Unit selling price ansvers to 2 decimal places, e.g. 52.70.) HILL INDUSTRIES Sales Budget Plan ? plan B Expected unit sales Unit selling price $ Total salesExplanation / Answer
Answers
Sales
$ 69,60,000.00
SP per unit
$ 8.00
No. of units sold
870,000 units
Plan A
Plan B
Expected Unit Sales
783000 [870000 – 10%]
980000 [870000 + 110000]
Unit Selling Price
$ 8.40
$ 7.50
Total Sales
$ 65,77,200.00
$ 73,50,000.00
Plan A
Plan B
Expected Unit Sales
783000
980000
Add: Desired ending finished goods unit
39150
68000
Total Finished goods requirement
822150
1048000
Less: Beginning Finished Goods Unit
41000
41000
Required Production Units
781150
1007000
Plan A
Plan B
Fixed Overheads
$ 18,83,000.00
$ 18,83,000.00
Units produced
781150
1007000
Fixed cost per unit
$ 2.41
$ 1.87
Direct labor
$ 1.80
$ 1.80
Direct material
$ 1.40
$ 1.40
Variable overhead
$ 1.20
$ 1.20
Production cost per unit
$ 6.81
$ 6.27
Plan A
Plan B
Sales
$ 65,77,200.00
$ 73,50,000.00
Cost of Goods Sold [Production cost per unit x Sold units]
$ 53,32,230.00
$ 61,44,600.00
Gross Profits
$ 12,44,970.00
$ 12,05,400.00
Sales
$ 69,60,000.00
SP per unit
$ 8.00
No. of units sold
870,000 units
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