Hill Industries had sales in 2016 of $ 6,800,000 and gross profit of $ 1,100,000
ID: 2512170 • Letter: H
Question
Hill Industries had sales in 2016 of $ 6,800,000 and gross profit of $ 1,100,000 . 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 100,000 units.
At the end of 2016, Hill has 40,000 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 60,000 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 $ 1,000,000 .
(a)
Plan A
Plan B
SHOW SOLUTION
LINK TO TEXT
(b)
Plan A
Plan B
Find the production cost per unit for each plan. Find the gross profit for each plan.
Hill Industries had sales in 2016 of $ 6,800,000 and gross profit of $ 1,100,000 . 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 100,000 units.
At the end of 2016, Hill has 40,000 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 60,000 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 $ 1,000,000 .
Explanation / Answer
Solution 1:
Current sales units = $6,800,000 / $8 = 850000 units
Solution 2:
Solution 3:
Sales Budget - Hills Industries - for the period December 31, 2017 Particulars Plan A Plan B Budgeted Sales Units 765000 950000 Selling price $8.40 $7.50 Total Sales $6,426,000.00 $7,125,000.00Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.