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Cullumber Industries had sales in 2021 of $7,208,000 and gross profit of $1.166,000. Management is considering two alternative budget plans to increase its gross profit
Cullumber Industries had sales in 2021 of $7,208,000 and gross profit of $1.166,000. 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 132,500 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 137,800 units. At the end of 2021, Cullumber has 45,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 41,000 units. If Plan B is accepted, the ending inventory should be equal to 74,000 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 $2,010,000. Compute the production cost per unit under each plan. (Round answers to 2 decimal places, eg. 1.25) Plan A Production cost per unit $ Plan B Compute the gross profit under each plan. Plan A Gross Profit $ Which plan should be accepted? should be accepted. Plan B
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