Calibri (Body) 11 A- A+ Paste B I til U Office Update To keep up-to-date with security updates, fixes, and improvemen 128 x & fx A B D E F G H 3 for the year ended December 31, 2020 based on 600,000 units sold. 0 Griffin Industries 1 Income Statement (partial) 2 for the year ended December 31, 2020 13 Sales revenue $ 5,400,000 14 Cost of goods sold 4,450,000 15 Gross profit $ 950,000 16 17 Management is considering two alternative pricing strategies to increase its gross profitin 2021. 18 The details of those strategies can be found on the "Strategy Proposals" tab in this worksheet. You 19 must enter your Accessi in cell B5 above before you will be able to read it. 20 21 Instructions 22 In the "Your Solutions" tab of this worksheet, prepare the following: 23 1. A 2021 sales budget for each proposal. 24 2. A 2021 production budget for each proposal 25 3. A 2021 budgeted partial income statement in the same format as the one shown above. Note 26 that you will need to calculate cost per unit in 2021 to determine budgeted cost of goods sold. 27 4. A short memo explaining which proposal you recommend and why. If you prefer, you may 28 prepare this in a separate.doc file and attach it with your assignment. 29 + Instructions Your Solutions Strategy Proposals Ready SCI Page Layout Formulas Data Review View X Calibri (Body) 12 A-A- hill Ge Paste B 1 U $ X Office Update To keep up-to-date with security updates, fixes, and improvements, choos AC18 B D E F H 1 1 Proposal 1 - Price Increase 2 This course of action has been proposed because the Director of Sales believes that our 3 product is underpriced, and that the market would mostly absorb a price hike. The proposal 4 calls for an average price increase of $0.59 per unit. The marketing department estimates that 5 the increase would reduce demand for our product by 39,500 units. 6 7 Proposal 2 - Price Reduction 8 The Chief Operating Officer has proposed that an increase in volume that would result from 9 more competitive pricing would allow Griffin to spread its considerable fixed costs over more 10 units and cut its per-unit costs. The proposal calls for a $0.45 reduction in unit sales price, 11 which would result in an estimated 49,000 increase in unit sales. 12 13 Production Outlook 14 Griffin has 38,000 units of finished goods inventory on hand at December 31, 2020. If Proposal 15 1 is implemented, Griffin plans to reduce inventory levels, with 2021 ending inventory equal 16 to 3% of 2021 unit sales. If Proposal 2 is implemented, Griffin intends to increase finished 17 goods on hand to 45,000 units at 2021 year end. 18 19 Cost Estimates 20 The following cost estimates have been developed for 2020. Direct materials: $2.32 per unit, 21 direct labor: $1.32 per unit, variable overhead: $0.91 per unit. Fixed overhead is estimated to 22 be $1,665,000 for 2021. Instructions Strategy Proposals Your Solutions + Ready