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Marsh Industries had sales in 2013 of $7,160,000 and gross profit of $1,064,600. Management is considering two alternative budget plans to increase its gross profit
Marsh Industries had sales in 2013 of $7,160,000 and gross profit of $1,064,600. Management is considering two alternative budget plans to increase its gross profit in 2014. Plan A would increase the selling price per unit from S8.95 to $9.66. Sales volume would decrease by 7% from its 2013 level. Plan B would decrease the selling price per unit by $0.38. The marketing department expects that the sales volume would increase by 139,300 units. At the end of 2013, Marsh has 35,500 units of inventory on hand. If Plan A is accepted, the 2014 ending inventory should be equal to 5% of the 2014 sales. If Plan B is accepted, the ending inventory should be equal to 48,700 units. Each unit produced will cost $1.78 in direct labor, $2.00 in direct materials, and $1.50 in variable overhead. The fixed overhead for 2014 should be $1,868,900. Prepare a sales budget for 2014 under each plan. Prepare a production budget for 2014 under each plan. compute the production cost per unit under each plan. Calculate the gross profit for each plan Which plan should be accepted
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