Problem 23-3A

Marsh Industries had sales in 2013 of $6,416,000 and gross profit of $1,053,800. Management is considering two alternative budget plans to increase its gross profit in 2014.

Plan A would increase the selling price per unit from $8.02 to $8.77. Sales volume would decrease by 9% from its 2013 level. Plan B would decrease the selling price per unit by $0.31. The marketing department expects that the sales volume would increase by 137,100 units.

At the end of 2013, Marsh has 39,000 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 48,800 units. Each unit produced will cost $1.91 in direct labor, $2.00 in direct materials, and $1.25 in variable overhead. The fixed overhead for 2014 should be $1,858,400.

A) Prepare a sales budget for 2014 under each plan. (Round Unit selling price to 2 decimal places, e.g. 25.28 and other values to 0 decimal places, e.g. 2,528.)

MARSH INDUSTRIES Sales Budget For the Year Ending December 31, 2014 Plan A Plan B Prepare a production budget for 2014 under each plan. MARSH INDUSTRIES Productiom Budget For the Year Ending December 31, 2014 Plan A Plan B Compute the production cost per unit under each plan. (Round Unit cost to 2 decimal places, e.g. 25.28.)