Hill Industries had sales in 2019 of $6,800,000 and gross profit
of $1,100,000. 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 100,000
units.
At the end of 2019, Hill has 40,000 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 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 2020 should be $1,007,490.
(a)
Correct answer iconYour 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.)
HILL INDUSTRIES |
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Plan A |
Plan B |
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Direct LaborDirect MaterialsExpected Unit SalesProduction UnitsTotal SalesUnit Selling Price |
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Direct LaborDirect MaterialsExpected Unit SalesProduction UnitsTotal SalesUnit Selling Price |
$ | $ | ||
Direct LaborDirect MaterialsExpected Unit SalesProduction UnitsTotal SalesUnit Selling Price |
$ | $ |
eTextbook and Media
Solution
Attempts: 3 of 3 used
(b)
Prepare a production budget for 2020 under each plan.
HILL INDUSTRIES |
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Plan A |
Plan B |
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Desired Ending Direct MaterialsDesired Ending Finished Goods UnitsRequired Production UnitsExpected Unit SalesDirect Materials per UnitTotal Pounds Needed for ProductionBeginning Direct MaterialsBeginning Finished Goods UnitsTotal Materials RequiredTotal Required UnitsDirect Materials Purchases |
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AddLess: Total Pounds Needed for ProductionDesired Ending Finished Goods UnitsTotal Required UnitsDirect Materials per UnitDesired Ending Direct MaterialsRequired Production UnitsDirect Materials PurchasesExpected Unit SalesBeginning Finished Goods UnitsBeginning Direct MaterialsTotal Materials Required |
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Total Materials RequiredTotal Required UnitsDirect Materials PurchasesDirect Materials per UnitExpected Unit SalesBeginning Finished Goods UnitsDesired Ending Direct MaterialsTotal Pounds Needed for ProductionRequired Production UnitsDesired Ending Finished Goods UnitsBeginning Direct Materials |
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AddLess: Total Materials RequiredRequired Production UnitsTotal Required UnitsBeginning Finished Goods UnitsDesired Ending Direct MaterialsTotal Pounds Needed for ProductionDirect Materials PurchasesDesired Ending Finished Goods UnitsDirect Materials per UnitBeginning Direct MaterialsExpected Unit Sales |
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Desired Ending Finished Goods UnitsDirect Materials per UnitRequired Production UnitsDesired Ending Direct MaterialsBeginning Direct MaterialsExpected Unit SalesTotal Required UnitsBeginning Finished Goods UnitsTotal Pounds Needed for ProductionTotal Materials RequiredDirect Materials Purchases |
Units Sold in 2019 (6800000/8) | 850000 | |
Plan A | Plan B | |
Expected Unit Sales (850000*(1-10%)) | 765,000 | |
Expected Unit Sales (850000+100000) | 950,000 | |
Unit Selling Price | $ 8.40 | |
Unit Selling Price (8-0.50) | $ 7.50 |
Part 1
HILL INDUSTRIES | ||
Sales Budget | ||
For the Year Ending December 31, 2020 | ||
Plan A | Plan B | |
Expected Unit Sales | 765,000 | 950,000 |
Multiply: Unit Selling Price | $ 8.40 | $ 7.50 |
Total Sales | $ 6,426,000 | $ 7,125,000 |
Part 2
HILL INDUSTRIES | |||
Production Budget | |||
For the Year Ending December 31, 2020 | |||
Plan A | Plan B | ||
Expected Unit Sales | 765,000 | 950,000 | |
Add : | Desired Ending Finished Goods Units (765000*5%) | 38,250 | 60,000 |
Total Required Units | 803,250 | 1,010,000 | |
Less: | Beginning Finished Goods Units | 40,000 | 40,000 |
Required Production Units | 763,250 | 970,000 |
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