Problem 21-3A (Part Level Submission)

Marsh Industries had sales in 2013 of $7,552,000 and gross profit of $1,298,000. Management is considering two alternative budget plans to increase its gross profit in 2014. Plan A would increase the selling price per unit from $9.44 to $9.91. Sales volume would decrease by 10% from its 2013 level. Plan B would decrease the selling price per unit by $0.59. The marketing department expects that the sales volume would increase by 177,000 units. At the end of 2013, Marsh has 47,200 units of inventory on hand. If Plan A is accepted, the 2014 ending inventory should be equal to 5% of the 2014 sales. If Plan B is accepted, the ending inventory should be equal to 59,000 units. Each unit produced will cost $2.12 in direct labor, $1.48 in direct materials, and $1.42 in variable overhead. The fixed overhead for 2014 should be $2,236,100.

Prepare a production budget for 2014 under each plan.