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Wildhorse 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 selling price per unit from $8.00 to $8.40. Sales volume would decrease by 125,000 units from its 2021 level. Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 130,000 units. At the end of 2021. Wildhorse has 42,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 38,000 units. If Plan B is accepted, the ending inventory should be equal to 68,000 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 $1,896,000.

Wildhorse 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 selling price per unit from $8.00 to $8.40. Sales volume would decrease by 125,000 units from its 2021 level. Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 130,000 units. At the end of 2021. Wildhorse has 42,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 38,000 units. If Plan B is accepted, the ending inventory should be equal to 68,000 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 $1,896,000.

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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Wildhorse 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 selling price per unit from $8.00 to $8.40. Sales volume would decrease by 125,000 units from its 2021 level, Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 130,000 units. At the end of 2021. Wildhorse has 42,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 38,000 units. If Plan B is accepted, the ending inventory should be equal to 68,000 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 $1,896,000. (c1) Your answer is incorrect. Compute the production cost per unit under each plan. (Round answers to 2 decimal places, e.g. 1.25., Production cost per unit $ (d) Your answer is partially correct. Compute the gross profit under each plan. Gross Profit $ Plan A Plan A $ Plan B Plan B
Transcribed Image Text:Wildhorse 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 selling price per unit from $8.00 to $8.40. Sales volume would decrease by 125,000 units from its 2021 level, Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 130,000 units. At the end of 2021. Wildhorse has 42,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 38,000 units. If Plan B is accepted, the ending inventory should be equal to 68,000 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 $1,896,000. (c1) Your answer is incorrect. Compute the production cost per unit under each plan. (Round answers to 2 decimal places, e.g. 1.25., Production cost per unit $ (d) Your answer is partially correct. Compute the gross profit under each plan. Gross Profit $ Plan A Plan A $ Plan B Plan B
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