Question

Problem 21-3A (Part Level Submission) Hill Industries had sales in 2016 of 56,800,000 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 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 $1.30 in direct labor, $1.40 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2017 should be $1,000,000. Your answer is partially correct. Try again. Prepare a sales budget for 2017 under each plan. (Round Unit selling ors to 2 decimal places, e.g. 52.70.) KILL INDUSTRIES Sales Budget For the Year Ending December 31, 2017 Plan A Plan B Expected unit sales 765000 958000 Unit selling price 8.40

Answer 1

Solution:

Sales units in 2016 = 6800000/ $8 = 850,000 units

HILL INDUSTRIES
Sales Budget
For the Year Ending December 31, 2020
	Plan A	Plan B
Expected unit sales [Plan A (850000*90%)] [Plan B (850000+100000)]	765000	950000
Unit selling price	$8.40	$7.50
Total sales	$64,26,000	$71,25,000
HILL INDUSTRIES
Production Budget
For the Year Ending December 31, 2020
	Plan A	Plan B
Expected unit sales	765000	950000
Add: Desired Ending Finished Goods Units	38250	60000
Total Required units	803250	1010000
Less: Beginning Finished Goods Units	40000	40000
Required Production Units	763250	970000