Metro Corporation sells two products, P1 and P2. In August 2016 Metro accumulated the following information in order to prepare The 2017 production budgets.

2017 projected sales:

Product Sales Price

P1 40,000 $62.00

P2 80,000 $56.00

2017 projected Finished Goods inventory:

Product 1/1/2017 12/31/2017

P1 2,000 2,500

P2 3,000 4,000

2017 Projected Raw Materials inventory:

Product 1/1/2017 12/31/2017

Z1 - lbs 4,000 5,000

Z2 - units 6,000 8,000

Z3 - feet 10,000 31,000

2017 Projected Production standards:

Units per P1 Units per P2 Unit cost of input

Direct labor hrs 1 0.25 0 $40.00

Direct labor hrs 2 0 0.1 $35.00

Machine hrs 0.1 0.05

Lbs of Z1 1 1.5 $1.50

Units of Z2 5 6 $0.50

Feet of Z3 3 4 $0.70

Fixed manufacturing overhead is estimated at $1,200,000 and is allocated based on the number of machine hours used in production. Variable manufacturing overhead is divided into two cost pools Engineering Management and Facilities Support. Engineering Management is budgeted at $5.00 per unit. Facilities Support is budgeted at $2.00 for each dollar of materials used.

9. What is the answer to Expected gross margin for 2017, assume FIFO and the cost of beginning inventory is $46.50 per unit of P1 and $41.00 per unit of P2. for a stretch budget in which sales of both products are increased by 10%? Assume the only capacity constraint is the availability of direct labor hours 1. An overtime premium of 50% will need to be paid if labor hours exceed 10,500.