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Waterway Industries had sales in 2021 of $8,504,000 and gross profit of $1,375,000. 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 156,000 units from its 2021 level. Plan B would decrease the unit selling price by $1. The marketing department expects that the sales volume would increase by 163,000 units. At the end of 2021, Waterway has 50,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 44,000 units. If Plan B is accepted, the ending inventory should be equal to 75,000 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 $2,252,500.

Waterway Industries had sales in 2021 of $8,504,000 and gross profit of $1,375,000. 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 156,000 units from its 2021 level. Plan B would decrease the unit selling price by $1. The marketing department expects that the sales volume would increase by 163,000 units. At the end of 2021, Waterway has 50,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 44,000 units. If Plan B is accepted, the ending inventory should be equal to 75,000 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 $2,252,500.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Compute the gross profit under each plan. (Round answers to O decimal places, eg. 125) Gross Profit $ Which plan should be accepted? (c1) Plan A should be accepted. Production cost per unit Plan B Compute the production cost por unit under each plan. (Round answers to 2 decimal places, eg 1.25) Plan A $ 1 Plan B
Transcribed Image Text:Compute the gross profit under each plan. (Round answers to O decimal places, eg. 125) Gross Profit $ Which plan should be accepted? (c1) Plan A should be accepted. Production cost per unit Plan B Compute the production cost por unit under each plan. (Round answers to 2 decimal places, eg 1.25) Plan A $ 1 Plan B
Waterway Industries had sales in 2021 of $8,504,000 and gross profit of $1,375,000. 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 156,000 units from its 2021 level. Plan B would decrease the unit selling price by $1. The marketing department expects that the sales volume would increase by 163,000 units. At the end of 2021, Waterway has 50,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 44,000 units. If Plan B is accepted, the ending inventory should be equal to 75,000 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 $2,252,500.
Transcribed Image Text:Waterway Industries had sales in 2021 of $8,504,000 and gross profit of $1,375,000. 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 156,000 units from its 2021 level. Plan B would decrease the unit selling price by $1. The marketing department expects that the sales volume would increase by 163,000 units. At the end of 2021, Waterway has 50,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 44,000 units. If Plan B is accepted, the ending inventory should be equal to 75,000 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 $2,252,500.
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