Hill Industries had sales in 2021 of $6,800,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit in 2022. Plan A would increase the unit selling price from $8 to $8.4. Sales volume would decrease by 125,000 units from its 2021 level. Plan B would decrease the unit selling price by $0.5. The marketing department expects that the sales volume would increase by 130,000 units. At the end of 2021, Hill has 40,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 35,000 units. If Plan B is accepted, the ending inventory should be equal to 60,000 units. Each unit produced will cost $1.50 in direct labor, $1.30 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2022 should be $1,895,000.
Hill Industries had sales in 2021 of $6,800,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit in 2022. Plan A would increase the unit selling price from $8 to $8.4. Sales volume would decrease by 125,000 units from its 2021 level. Plan B would decrease the unit selling price by $0.5. The marketing department expects that the sales volume would increase by 130,000 units. At the end of 2021, Hill has 40,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 35,000 units. If Plan B is accepted, the ending inventory should be equal to 60,000 units. Each unit produced will cost $1.50 in direct labor, $1.30 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2022 should be $1,895,000.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 18E: Carmichael Corporation is in the process of preparing next years budget. The pro forma income...
Related questions
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
Transcribed Image Text:Compute the production cost per unit under each plan. (Round answers to 2 decimal places, e.g. 1.25.)
Production cost per unit $
Plan A
10
$
Plan B
Transcribed Image Text:Hill Industries had sales in 2021 of $6,800,000 and gross profit of $1,100,000. Management is considering two alternative budget
plans to increase its gross profit in 2022
Plan A would increase the unit selling price from $8 to $8.4. Sales volume would decrease by 125,000 units from its 2021 level. Plan B
would decrease the unit selling price by $0.5. The marketing department expects that the sales volume would increase
by 130,000 units.
At the end of 2021, Hill has 40,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 35,000
units. If Plan B is accepted, the ending inventory should be equal to 60,000 units. Each unit produced will cost $1.50 in direct labor,
$1.30 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2022 should be $1,895,000.
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!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
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.Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning