Hill Industries had sales in 2019 of $7,200,000 and gross profit of $1,263,000. Management is considering two alternative budget plans to increase its gross profit in 2020. Plan A would increase the selling price per unit from $8.00 to $8.40. Sales volume would decrease by 10% from its 2019 level. Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 113,000 units. At the end of 2019, Hill has 40,000 units of inventory on hand. If Plan A is accepted, the 2020 ending inventory should be equal to 5% of the 2020 sales. If Plan B is accepted, the ending inventory should be equal to 60,000 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 2020 should be $1,231,960.

1. Prepare a sales budget for 2017 under each plan.

2. Prepare a production budget for 2017 under each plan.

3. Compute the production cost per unit under each plan.

4. Compute the gross profit under each plan.

5. Which plan should be accepted?