Hill Industries had sales in 2019 of $7.120.000 and gross profit of $1,121,000. Management is considering two alternative budgetplans 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 Bwould decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increaseby 120,000 units.At the end of 2019, Hill has 48,000 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 61,000 units. Each unit produced will cost $1.80 indirect labor, $1.40 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2020 should be $1,110,270. 1. Explain why a company needs these budgets used in #2 of yourhomework and how will they help the manager prepare for the next year?For example: ordering inventory, increasing or decreasing material costs sotheir sales will increase and cost decrease (labor, raw materials, or coststhat pertain to operations)? Make sure to explain what each budget tellsthe manager.

Computation of Gross Profit for 2 Alternative Budgets : S. noParticulars2019Budget for…

1. Explain why a company needs these budgets used in #2 of your homework and how will they help the manager prepare for the next year? For example: ordering inventory, increasing or decreasing material costs so their sales will increase and cost decrease (labor, raw materials, or costs that pertain to operations)? Make sure to explain what each budget tells the manager.

1. Explain why a company needs these budgets used in #2 of your homework and how will they help the manager prepare for the next year? For example: ordering inventory, increasing or decreasing material costs so their sales will increase and cost decrease (labor, raw materials, or costs that pertain to operations)? Make sure to explain what each budget tells the manager.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Why is it relevant to calculate the fixed cost budget? Management must account for these fixed…

A: A fixed cost budget is a financial plan that estimates the total amount of fixed costs that a…

Q: Various types of budgets facilitate understanding about the big picture of a business. There are…

A: Budget A budget is the estimate of incomes and expenses over a specified period. A budget helps in…

Q: A company uses two major material inputs in its production.

A: In this question, we have to calculate the probability of the cost of material1 and material 2

Q: What is a good response to? Hello everyone, What are the primary benefits of using flexible budgets…

A: A flexible budget is a budget that adjusts or flexes for changes in the volume of activity. Unlike a…

Q: am. 104.

A: Let's select a company that produces healthy food/beverages. We'll call this company 'Healthy Foods…

Q: Discuss why budgets are so important for all organizations. Describe some advantages and…

A: Budgets are an indispensable part of business organizations because they assist business…

Q: The manager of a retail shop is awarded a bonus if his shop stays within the quarterly budget. Often…

A: The expected code of conduct under various business situations requiring individuals to take an…

Q: Problem 3 Assume the approved food operations budget for the Hilotown Restaurant for 20X1 is as…

A: Variable Cost :— It is the cost that changes with change in units. Variable cost per unit is…

Q: Prior midnight March 11, post at least once about this week's Wiley assignment. You may post asking…

A: A budget is a financial plan that outlines an organization's or individual's expected income and…

Q: Efficient and effective use of limited resources is the key to success in today’s economy. Assisting…

A: Budgeting is a tool used in planning and controlling process of an organisation. It involves…

Q: Discuss why small businesses might not choose to extensively engage in the budget process. Also…

A: Budgeting is an important part of the business process. Without budgeting a business can not track…

Q: COST OF GOODS SOLD BUDGET - Direct Materials Cost of goods sold are dependent upon the level of…

A: Cost of Goods sold is directly dependent on the level of sales. As the sales level increases, cost…

Q: Explain how a flexible budget can be of value to businesses

A: Answer: Flexible budget is the budget which can be estimated as per the quantity for variable cost…

Q: Below in the first table, required level of competencies and performance evaluations are given. If…

A: A budget refers to a plan that is pre-decided and lists all the estimated expenses and the estimated…

Q: Required: Prepare a budgeted income statement for year 2. (Round your per unit average cost…

A: Budgeted report is prepared on the basis of past reports to achieve the goal of future years. If…

Q: Which of the following is a benefit of using budget-management software? (check all that apply).…

A: Benefit of Budgeted Management Software Budgeted management software helps to the management in…

Q: Which of the following is an example of the planning function of the budgeting process? A. A budget…

A: Budgeting process: The process of streamlining the future expenditure process by predicting or…

Q: What are some characteristics of performance-based budgeting? What are some advantages and…

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: Which of the following should a manager consider when creating a sales budget ? All of the listed…

A: The objective of the question is to identify the factors that a manager should consider when…

Q: What are some of the challenges in creating a budget for a company.

A: The objective of this question is to understand the various challenges that a company might face…

Q: general, the starting point in preparing a master budget should be to forecast production volume, if…

A: Answer 1-.True,Management planning is the inital step to budget starts its plans according its…

Q: Which of the following is not a benefit of budgeting? O Provide a way to measure business…

A: The answer is : Provide a way to hire specialized labors. Hiring specialised labour is not something…

Q: For this assignment you are to assume that you are involved in the preparation of your company's…

A: The issue is that the sales team is provided that the expected sales for the year and also there…

Q: difference between a flexible budget and a static budget?

A: A budget can be defined as an estimation or forecast of the income, revenue, and expenses for a…

Q: A SMART goal is specific, making, actionable, relative, timely. significant, making, actionable,…

A: since you have asked multiple, we will solve the first question for you if you want any specific…

Q: Prioritizing Expenses for a Company Website Part 1: Select a website for a local small business.…

A: Here we'll discuss about 5 top things to make website good.

Q: Budgets need to be fair and attainable for employees to consider the budget important in their…

A: The objective of the question is to identify which of the given situations can potentially lead to…

Q: Considering what you have learned in this module, describe the basic flow of the various operating…

A: Overview of the Basic Flow of Operating Budgets within a Master Budget for a Manufacturing FirmThe…

Concept explainers

Master Budget

A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.

Sales Budget and Selling

A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.

Question

Hill Industries had sales in 2019 of $7.120.000 and gross profit of $1,121,000. 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 120,000 units.
At the end of 2019, Hill has 48,000 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 61,000 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 $1,110,270.

1. Explain why a company needs these budgets used in #2 of your
homework and how will they help the manager prepare for the next year?
For example: ordering inventory, increasing or decreasing material costs so
their sales will increase and cost decrease (labor, raw materials, or costs
that pertain to operations)? Make sure to explain what each budget tells
the manager.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Step 1 - Outcomes of both alternative Budgets

VIEW

Step 2: Step 2 - Inference from Alternative Budgets

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Subject - account Please help me. Thankyou.
Why do companies and businesses create budgets, what is the importance and how do budgets help businesses be more successful? Provide examples.
Your department head wants you to perform a cost analysis and provide data to the CFO next week. The budget information below comes directly from your accounting department and the figures are correct, however you know that your CFO's time is important and she often asks for ratios that are not calculated by your accounting department. Your department head has challenged you to present common ratios as he wants to mentor you for a potential assistant director position. Your figures need to be specific and accurate. Since you do not know "exactly" which figures to present, you decided to cover the Eight Basic Ratios Used in Health Care. This way, you can answer any question intelligently. Use the data listed below to calculate (show your work) each of the Eight Basic Ratios Used in Health Care. Explain for each ratio what your answer means to the company. (You should have 8 explanations.) Current Assets = $18,000,542.00 Current Liabilities = $12,240,543.00 Cash & Cash…
Although most new businesses begin on shoestring budgets and the accounting is typically done on a cash basis, it’s still important to consider what the Balance Sheet and Income Statement can tell us about our company’s health and the direction in which it’s headed. Explain how each of these financial reports accomplishes that and why assets and liabilities are listed in a particular order
What are some of the benefits of a self-imposed budget? Choose all that apply. Top-down mentality Inclusiveness of all managers Fear of punishment tends to motivate Budgets are more realistic More autonomy Greater accuracy Lowers employee morale 10 step cycle Better motivation
This week we have covered the topic of budgeting. Effective budgeting and responsibility accounting are crucial for organizations to achieve financial stability and success in today's dynamic business environment. Considering this, respond to ONE of the following four questions for your initial response. How does the concept of responsibility accounting contribute to organizational accountability? If you have experiences from previous jobs, you can share those. Otherwise, find examples from companies through internet research, or share your insight on why you think this may matter. What do you think are the key components of a successful budgeting process within an organization? Are there any specific challenges that organizations may commonly face when implementing a budget? How can organizations strike the right balance between budgetary control and flexibility to adapt to changing market conditions? What are some best practices for adjusting budgets when necessary while still…
"Train your customers", as discussed in the Budgeting module, refers to training customers on how to properly use products that the company sells. Group of answer choices True False
1. How does budgeting provide important information to managers and operating personnel? 2. Explain at least three times of budgets. 3. Explain how a flexible budget is used?
The master budget will be different from business to business.This is due to all of the following,except: A.varying sizes and complexities of business B.retail versus service versus manufacturing businesses C.profitability of the business D.number of different products sold
Which of the following is NOT true of the budgeting process? Question 8 options: Budgeting provides feedback to management to aid in assessing how well it's reaching its goals. Budgets force managers to plan for the future. Budgets force managers to consider relations among operations across the entire value chain. The performance report is prepared as part of the master budget.
When gathering financial information, the entrepreneur should develop a budget that includes expected sales and expense figures for the first year. True or false
arrow_forward Question .(iii) To help achieve the budgeted sales for the year, Sampson is about to introduce bonuses for itssales staff. The bonuses will be an increasing percentage of the gross sales made, by eachsalesperson, above certain monthly targets.(iv) The company is using a new general ledger software package. The financial controller is impressedwith the new system, because management accounts are easily produced and allow detailedcomparisons with budgets and prior-period figures across product lines and geographical areas.The conversion to the new system occurred with a minimum of fuss. As it is a popular computerpackage, it required only minor modifications.(v) As part of the conversion, the position of systems administrator was created. This position isresponsible for all systems maintenance, including data backups and modifications. These taskswere the responsibility of the accountant.Required:For each of the scenarios above, explain how the components of…