Question

Problem 21-3A (Part Level Submission) Hill Industries had sales in 2016 of $7,120,000 and gross profit of $1,274,000. 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 104,000 units. At the end of 2016, Hill has 46,000 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 67,000 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 2017 should be $1,947,000. (a) Your answer is correct. Prepare a sales budget for 2017 under each plan. (Round Unit selling price answers to 2 decimal places, e.g. 52.70.) HILL INDUSTRIES Sales Budget For the Year Ending December 31, 2017 Plan A Plan B Expected unit sales 801000 T 994000 Unit selling price 8.40 7.50 Total sales 6728400 7455000 Click if you would like to Show Work for this question: Open Show Work

Answer 1

Workings:

Workings: Expected 2017 Change in Volumes 10% 2016 Volume Increase/Decrease 890,000 Decrease by ($7,120,000/$8.00) 890,000 Increase by ($7,120,000/$8.00) Expected 2017 Volume 801,000 (890,000 - (890,000 X 10%) 994,000 (890,000 + 104,000) 104,000

Answer to Question A and B:

Question A Hill Industries Sales Budget For the year ending December 31, 2017 Plan A Plan B Expected Unit Sales 801,000 994,000 Unit Selling Price 8.40 $ 7.50 Total Sales 6,728,400 $ 7,455,000 Calculation (801,000 X $8.40) (801,000 X $7.50) Question B Hill Industries Production Budget For the year ending December 31, 2017 Plan A Plan B Expected Unit Sales 801,000 994,000 Add: Desired Ending Inventory 40,050 67,000 Calculation (801,000 X 5%) Total Required Units 841,050 1,061,000 Calculation (801,000 + 40,050) (994,000 + 67,000) 46,000 46,000 Less: Beginning Finished Goods Unit Required Production Units Calculation 795,050 1,015,000 (841,050 - 46,000) |(1,061,000 - 46,000)