Question

Problem 22-03A a-b, c1, d (Video) (Part Level Submission)

Blossom Industries had sales in 2019 of $7,280,000 and gross profit of $1,149,000. Management is considering two alternative budget plans to increase its gross profit in 2020.

Plan A would increase the selling price per unit from $8.00 to $8.40. Sales volume would decrease by 10% from its 2019 level. Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 112,000 units.

At the end of 2019, Blossom has 44,000 units of inventory on hand. If Plan A is accepted, the 2020 ending inventory should be equal to 5% of the 2020 sales. If Plan B is accepted, the ending inventory should be equal to 68,000 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 2020 should be $1,974,599.

Your answer is correct.

Prepare a sales budget for 2020 under each plan. (Round Unit selling price answers to 2 decimal places, e.g. 52.70.)

BLOSSOM INDUSTRIES Sales Budget December 31, 2020For the Quarter Ending December 31, 2020For the Year Ending December 31, 2020
		Plan A		Plan B
Direct LaborDirect MaterialsExpected Unit SalesProduction UnitsTotal SalesUnit Selling Price
Direct LaborDirect MaterialsExpected Unit SalesProduction UnitsTotal SalesUnit Selling Price		$		$
Direct LaborDirect MaterialsExpected Unit SalesProduction UnitsTotal SalesUnit Selling Price		$		$

Prepare a production budget for 2020 under each plan.

BLOSSOM INDUSTRIES Production Budget For the Year Ending December 31, 2020For the Quarter Ending December 31, 2020December 31, 2020
		Plan A		Plan B
Beginning Direct MaterialsTotal Materials RequiredExpected Unit SalesTotal Pounds Needed for ProductionDirect Materials PurchasesTotal Required UnitsBeginning Finished Goods UnitsRequired Production UnitsDesired Ending Direct MaterialsDesired Ending Finished Goods UnitsDirect Materials per Unit
AddLess : Direct Materials PurchasesDesired Ending Finished Goods UnitsExpected Unit SalesRequired Production UnitsTotal Materials RequiredDesired Ending Direct MaterialsTotal Pounds Needed for ProductionTotal Required UnitsDirect Materials per UnitBeginning Direct MaterialsBeginning Finished Goods Units
Total Required UnitsBeginning Direct MaterialsBeginning Finished Goods UnitsDesired Ending Direct MaterialsTotal Pounds Needed for ProductionDesired Ending Finished Goods UnitsDirect Materials per UnitDirect Materials PurchasesExpected Unit SalesRequired Production UnitsTotal Materials Required
AddLess : Desired Ending Direct MaterialsDirect Materials PurchasesRequired Production UnitsTotal Pounds Needed for ProductionTotal Materials RequiredDirect Materials per UnitBeginning Direct MaterialsExpected Unit SalesTotal Required UnitsBeginning Finished Goods UnitsDesired Ending Finished Goods Units
Expected Unit SalesDirect Materials PurchasesDirect Materials per UnitTotal Pounds Needed for ProductionDesired Ending Finished Goods UnitsTotal Required UnitsRequired Production UnitsBeginning Finished Goods UnitsBeginning Direct MaterialsDesired Ending Direct MaterialsTotal Materials Required

Answer 1

Prepare a sales budget for 2020 under each plan. (Round Unit selling price answers to 2 decimal places, e.g. 52.70.)

BLOSSOM INDUSTRIES Sales Budget For the Year Ending December 31, 2020
		Plan A		Plan B
Unit Sales		910000*90% = 819000		910000+112000 = 1022000
Unit Selling Price		$8.40		$7.50
Total Sales		$6879600		$7665000

Prepare a production budget for 2020 under each plan.

BLOSSOM INDUSTRIES Production Budget For the Year Ending December 31, 2020
		Plan A		Plan B
Expected Unit Sales		819000		1022000
Add: Desired Ending Finished Goods		32760		68000
Total Required Units		851760		1090000
Less: Beginning Finished Goods Units		-44000		-44000
Required Production Units		807760		1046000