Hill Industries had sales in 2016 of $6,800,000 and gross profit of $1,135,000. Management is considering two alternative budget plans to increase its gross profit in 2017. Plan A would increase the selling price per unit from $8.00 to $8.40. Sales volume would decrease by 10% from its 2016 level. Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 108,000 units. At the end of 2016, Hill has 44,000 units of inventory on hand. If Plan A is accepted, the 2017 ending inventory should be equal to 5% of the 2017 sales. If Plan B is accepted, the ending inventory should be equal to 62,000 units. Each unit produced will cost $1.80 in direct labor, $1.40 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2017 should be $1,733,000.

Prepare a sales budget for 2017 under each plan. (Round Unit selling price answers to 2 decimal places, e.g. 52.70.)

HILL INDUSTRIES Sales Budget For the Year Ending December 31, 2017December 31, 2017For the Quarter Ending December 31, 2017
		Plan A		Plan B
Expected unit sales
Unit selling price		$		$
Total sales		$		$

Prepare a production budget for 2017 under each plan.

HILL INDUSTRIES Production Budget For the Quarter Ending December 31, 2017For the Year Ending December 31, 2017December 31, 2017
		Plan A		Plan B
Beginning Direct MaterialsTotal Required UnitsBeginning Finished Goods UnitsRequired Production UnitsDesired Ending Finished Goods UnitsDesired Ending Direct MaterialsTotal Materials RequiredExpected Unit SalesDirect Materials per UnitDirect Materials PurchasesTotal Pounds Needed for Production
AddLess : Total Pounds Needed for ProductionBeginning Direct MaterialsDesired Ending Direct MaterialsDesired Ending Finished Goods UnitsDirect Materials per UnitTotal Materials RequiredTotal Required UnitsDirect Materials PurchasesExpected Unit SalesRequired Production UnitsBeginning Finished Goods Units
Desired Ending Direct MaterialsTotal Pounds Needed for ProductionBeginning Direct MaterialsTotal Required UnitsTotal Materials RequiredDirect Materials PurchasesBeginning Finished Goods UnitsDirect Materials per UnitExpected Unit SalesDesired Ending Finished Goods UnitsRequired Production Units
AddLess : Beginning Direct MaterialsExpected Unit SalesBeginning Finished Goods UnitsRequired Production UnitsDesired Ending Direct MaterialsDirect Materials PurchasesTotal Materials RequiredDesired Ending Finished Goods UnitsTotal Pounds Needed for ProductionDirect Materials per UnitTotal Required Units
Total Pounds Needed for ProductionTotal Required UnitsRequired Production UnitsBeginning Finished Goods UnitsDesired Ending Direct MaterialsDesired Ending Finished Goods UnitsTotal Materials RequiredDirect Materials per UnitBeginning Direct MaterialsExpected Unit SalesDirect Materials Purchases

Compute the production cost per unit under each plan. (Round answers to 2 decimal places, e.g. 1.25.)

		Plan A		Plan B
Production cost per unit		$		$

Compute the gross profit under each plan.

		Plan A		Plan B
Gross Profit		$		$

Which plan should be accepted?

Plan APlan B

should be accepted.