Problem 23-3A (Part Level Submission) Hill Industries had sales in 2016 of $ 6,8

Question

Problem 23-3A (Part Level Submission) Hill Industries had sales in 2016 of $ 6,800,000 and gross profit of $ 1,135,000 . 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 108,000 units. At the end of 2016, Hill has 44,000 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 62,000 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 $ 1,733,000 . (a) Prepare a sales budget for 2017 under each plan. (Round Unit selling price answers to 2 decimal places, e.g. 52.70.) HILL INDUSTRIES Sales Budget Plan A Plan B Expected unit sales Unit selling price $ $ Total sales $ $

Explanation / Answer

Answer a. Sales Budget For 2017 Plan A Plan B Expected No. of Units sold                    765,000                       958,000 850,000 Units X 90% 850,000 Units + 108,000 Units   SP per Unit                           8.40                              7.50 Total Sales in $                6,426,000                   7,185,000 Sales in 2016                6,800,000 SP Per Unit                           8.00 No of Units Sold - 2016                    850,000

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