Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Colt Industries had sales in 2010 of $6,400,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit
Colt Industries had sales in 2010 of $6,400,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit in 2011. Plan A would increase the selling price per unit from $8.00 to $8.40. Sales volume would decrease by 5% from its 2010 level. Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 150,000 units. At the end of 2010, Colt has 40,000 units of inventory on hand. If Plan A is accepted, the 2011 ending inventory should be equal to 5% of the 2011 sales. If Plan B is accepted, the ending inventory should be equal to 50,000 units. Each unit produced will cost $1.80 in direct labor, $1.25 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2009 should be $1,895,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started