Crane Industries had sales in 2021 of $5,576,000 and gross profit of $902,000. 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 102,500 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 106,600 units. At the end of 2021, Crane has 33,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 29,000 units. If Plan B is accepted, the ending inventory should be equal to 50,000 units. Each unit produced will cost $1.50 in direct labor, $1.30 indirect materials, and $1.20 in variable overhead. The fixed overhead for 2022 should be $1,554,000.

CRANE INDUSTRIES Production Budget For the Year Ending December 31, 2022 V Plan A Plan B Expected Unit Sales 4993800 6027000 Add : Desired Ending Finished Goods Units 5022800 Total Materials Required 10016600 Less V: Beginning Finished Goods Units Required Production Units Plan A Plan B Production cost per unit $ $ Plan A Plan B Gross Profit $ $ Which plan should be accepted? V should be accepted