Problem 21-3A (Part Level Submission) Marsh Industries had sales in 2013 of $6,4
ID: 2473126 • Letter: P
Question
Problem 21-3A (Part Level Submission)
Marsh Industries had sales in 2013 of $6,400,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit in 2014.
Plan A would increase the selling price per unit from $8.00 to $8.40. Sales volume would decrease by 10% from its 2013 level. Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 100,000 units.
At the end of 2013, Marsh has 38,000 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 60,000 units. Each unit produced will cost $1.80 in direct labor, $1.30 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2014 should be $1,895,000.
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MARSH INDUSTRIES
Sales Budget
For the Year Ending December 31, 2014
Plan A
Plan B
Expected unit sales
Unit selling price
Total sales
Problem 21-3A (Part Level Submission)
Marsh Industries had sales in 2013 of $6,400,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit in 2014.
Plan A would increase the selling price per unit from $8.00 to $8.40. Sales volume would decrease by 10% from its 2013 level. Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 100,000 units.
At the end of 2013, Marsh has 38,000 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 60,000 units. Each unit produced will cost $1.80 in direct labor, $1.30 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2014 should be $1,895,000.
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Explanation / Answer
MARSH Industries Sale Budget For the year ending December 31 2014 Plan A Plan B Expected Sales units 720,000 900,000 Unit Selling Price $ 8.4 8 Total Sales in $ 6,048,000 6,750,000 Working Paln A 2013 sales value 6,400,000 Sale price 8 Sale Quantity for 2013 800,000 Sale Quantity for 2014 (800000*90%) 720,000 Sale price 8.4 Sale value 6,048,000 Paln B 2013 sales value 6,400,000 Sale price 8 Sale Quantity for 2013 800,000 Quantity increase by 2014 100,000 Sale quantity for 2014 900,000 Sale price (8-0.50) 7.5 Sale value 6,750,000
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