Question

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.

(a) 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 $ $

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 December 31, 2020For the Quarter Ending December 31, 2020 For the Year Ending December 31, 2020
		Plan A		Plan B
Expected Unit Sales		819000		1022000
Unit Selling Price		$8.40		$7.50
Total Sales		$6879600		$7665000

Expected Unit sales:-

Plan A = ($7280000/$8) * 90% = 819000

Plan B = ($7280000/$8) + 112000 = 1022000