Novak Industries had sales in 2021 of $5,592,000 and gross profit of $1,097,000. 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 10% 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 100,000 units. At the end of 2021, Novak has 38,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be equal to 5% of the 2022 sales. If Plan B is accepted, the ending inventory should be equal to 61,000 units. Each unit produced will cost $1.80 in direct labour, $1.20 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2022 should be $1,907,000.

Prepare a sales budget for 2022 under each plan. (Round the selling price per unit to 2 decimal places, e.g. 15.25.)

NOVAK INDUSTRIES Sales Budget For the Year Ending December 31, 2022
		Plan A		Plan B
Expected sales in units		enter a number of units		enter a number of units
Unit selling price		$enter a dollar amount rounded to 2 decimal places		$enter a dollar amount rounded to 2 decimal places
Total sales		$enter a total dollar amount		$enter a total dollar amount

Question Part Score

--/4

Prepare a production budget for 2022 under each plan.

NOVAK INDUSTRIES Production Budget For the Year Ending December 31, 2022
		Plan A		Plan B
select an opening production budget item Required productionTotal required unitsDesired ending finished goodsExpected sales in unitsBeginning finished goods		enter a number of units		enter a number of units
select between addition and deduction AddLess: select a production budget item Required productionDesired ending finished goodsTotal required unitsExpected sales in unitsBeginning finished goods		enter a number of units		enter a number of units
select a summarizing line for the first part Expected sales in unitsBeginning finished goodsDesired ending finished goodsRequired productionTotal required units		enter a total number of units for the first part		enter a total number of units for the first part
select between addition and deduction AddLess: select a production budget item Beginning finished goodsDesired ending finished goodsExpected sales in unitsTotal required unitsRequired production		enter a number of units		enter a number of units
select a closing production budget item Desired ending finished goodsRequired productionBeginning finished goodsExpected sales in unitsTotal required units		enter a total number of units		enter a total number of units

Question Part Score

--/4

Calculate the production cost per unit under each plan. (Round answers to 2 decimal places, e.g. 15.25.)

		Plan A		Plan B
Production cost per unit		$enter a dollar amount rounded to 2 decimal places		$enter a dollar amount rounded to 2 decimal places

Question Part Score

--/4

Calculate the gross profit under each plan. (Round per unit calculations to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 125.)

NOVAK INDUSTRIES Budgeted Gross Profit For the Year Ending December 31, 2022
		Plan A		Plan B
Expected sales		$enter a dollar amount		$enter a dollar amount
Budgeted cost of goods sold		enter a dollar amount		enter a dollar amount
Gross profit		$enter a total amount		$enter a total amount

Which plan should be accepted?

select a plan BothNeitherPlan A/Plan B

should be accepted.