Question
Pharoah Industries had sales in 2021 of $5,624,000 and gross profit of $1,094,000. Management is considering two alternative budget plans to increase its gross profit
Pharoah Industries had sales in 2021 of $5,624,000 and gross profit of $1,094,000. 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 99,000 units. At the end of 2021, Pharoah has 39,000 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 59,000 units. Each unit produced will cost $1.90 in direct labour, $1.40 in direct materials, and $1.30 in variable overhead. The fixed overhead for 2022 should be $1,889,000.
Prepare a sales budget for 2022 under each plan. (Round the selling price per unit to 2 decimal places, e.g. 15.25.)
PHAROAH 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.
PHAROAH INDUSTRIES Production Budget For the Year Ending December 31, 2022 | ||||
---|---|---|---|---|
Plan A | Plan B | |||
select an opening production budget item Required productionBeginning finished goodsDesired ending finished goodsExpected sales in unitsTotal required units | enter a number of units | enter a number of units | ||
select between addition and deduction AddLess: select a production budget item Expected sales in unitsDesired ending finished goodsTotal required unitsBeginning finished goodsRequired production | enter a number of units | enter a number of units | ||
select a summarizing line for the first part Desired ending finished goodsExpected sales in unitsRequired productionTotal required unitsBeginning finished goods | 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 Total required unitsExpected sales in unitsDesired ending finished goodsBeginning finished goodsRequired production | enter a number of units | enter a number of units | ||
select a closing production budget item Expected sales in unitsTotal required unitsDesired ending finished goodsRequired productionBeginning finished goods | 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.)
PHAROAH 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 APlan B | should be accepted. |
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