Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

P13-3 Hill Industries had sales in 2016 of $6,800,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross

image text in transcribedimage text in transcribed

P13-3 Hill Industries had sales in 2016 of $6,800,000 and gross profit of $1,100,000. 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 100,000 units. At the end of 2016, Hill has 40,000 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 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 over head for 2017 should be $1,895,000. Instructions (a) Prepare a sales budget for 2017 under each plan. (b) Prepare a production budget for 2017 under each plan. (c) Compute the production cost per unit under each plan. Why is the cost per unit different for each of the two plans? (Round to two decimals.) (d) Which plan should be accepted? (Hint: Compute the gross profit under each plan.) Refer to illustration 13-3 Hill Industries Sos Budget For the Year Ending December 31, 2017 Refer to Illustration 13-5 Hill Industries Production Budget For the Year Ending December 31, 2017 Plan Plan kandid Show work or include formulas for all cells (round to two decimals Plan Plan c) Total variable costs To Swed costs Total costs Tous Contit

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials Of Xbrl Financial Reporting In The 21st Century

Authors: Bryan Bergeron

1st Edition

0471220779, 978-0471220770

More Books

Students also viewed these Accounting questions

Question

Does it exceed two pages in length?

Answered: 1 week ago

Question

Does it avoid typos and grammatical errors?

Answered: 1 week ago