Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 9, Problem 9.3AP
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 $, 20 in variable
Instructions
(a) Prepare a sales budget for 2017 under each plan.
(b) Prepare a production budget for 2017 under each plan.
(c) Compute the production cost per unit under each plan. Why is the cost per unit different for each of the two plans? (Round to two decimals.)
(d) Which plan should be accepted? (Hint: Compute the gross profit under each plan.)
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Coronado Industries had sales in 2021 of $5,698,400 and gross profit of $921,800. Management is considering two alternative budget plans to increase its gross profit in 2022.Plan A would increase the unit selling price from $8.00 to $8.40. Sales volume would decrease by 104,750 units from its 2021 level. Plan B would decrease the unit selling price by $0.50. The marketing department expects that the sales volume would increase by 108,940 units.At the end of 2021, Coronado has 33,520 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 29,330 units. If Plan B is accepted, the ending inventory should be equal to 50,280 units. Each unit produced will cost $1.5 in direct labor, $1.3 in direct materials, and $1.2 in variable overhead. The fixed overhead for 2022 should be $1,588,010.
Prepare a sales budget for 2022 under each plan.
Coronado Industries had sales in 2021 of $5,521,600 and gross profit of $893,200. Management is considering two alternative budget plans to increase its gross profit in 2022.Plan A would increase the unit selling price from $8.00 to $8.40. Sales volume would decrease by 101,500 units from its 2021 level. Plan B would decrease the unit selling price by $0.50. The marketing department expects that the sales volume would increase by 105,560 units.At the end of 2021, Coronado has 32,480 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 28,420 units. If Plan B is accepted, the ending inventory should be equal to 48,720 units. Each unit produced will cost $1.5 in direct labor, $1.3 in direct materials, and $1.2 in variable overhead. The fixed overhead for 2022 should be $1,538,740.
Coronado Industries had sales in 2021 of $5,698,400 and gross profit of $921,800. Management is considering two alternative budget plans to increase its gross profit in 2022.
Plan A would increase the unit selling price from $8.00 to $8.40. Sales volume would decrease by 104,750 units from its 2021 level. Plan B would decrease the unit selling price by $0.50. The marketing department expects that the sales volume would increase by 108,940 units.
At the end of 2021, Coronado has 33,520 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 29,330 units. If Plan B is accepted, the ending inventory should be equal to 50,280 units. Each unit produced will cost $1.5 in direct labor, $1.3 in direct materials, and $1.2 in variable overhead. The fixed overhead for 2022 should be $1,588,010. Prepare a production budget for 2022 under each plan.
Chapter 9 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 9 - Prob. 1QCh. 9 - Prob. 2QCh. 9 - Prob. 3QCh. 9 - (a) Accounting plays a relatively unimportant role...Ch. 9 - What criteria are helpful in determining the...Ch. 9 - Lori Wilkins maintains that the only difference...Ch. 9 - Prob. 7QCh. 9 - What is budgetary slack? What incentive do...Ch. 9 - Prob. 9QCh. 9 - What budget is the starting point in preparing the...
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