Pharoah Industries had sales in 2021 of $7,616,000 and gross profit of $1,232,000. 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 140,000 units from its 2021 level. plan B would devrease the selling price per unit by $0.50. The marketing department expects that the sale volume would increase by 145,600 units.

At the end of 2021, Pharoah has 48,000 units of inventory on hand. If plan A accepted, the 2022 ending inventory should be 44,000 units. If plan B accepted, the ending inventory should be equal to 80,000 units. Each unit produced will cost $1.50 in direct labor, $1.30 in direct material, and $1.20 in variable overhead. The fixed overhead for 2022 should be $2,124,000.

a. Prepare a sales budget for 2022 under each plan (round unit selling price answers to 2 decimal places, e.g. 52.70.)

Pharoah Industries Sales Budget

Plan A Plan B

b. Prepare a production budget for 2022 under each plan

Pharoah Industries Production Budget

Plan A Plan B

C1. Compute the production cost per unit under each plan (round answers to 2 decimal places e.g. 1.25.)

Plan A Plan B

Production cost per unit $ $

d. Compute the gross profit under each plan

Plan A Plan B

Gross Profit $ $

Which plan should be accepted?