Question
Question 2 Sheffield Industries had sales in 2016 of $6,960,000and gross profit of $1,152,000. Management is considering two alternative budget plans to increase its gross
Question 2
Sheffield Industries had sales in 2016 of $6,960,000and gross profit of $1,152,000. Management is considering two alternative budget plans to increase its gross profit in 2017.
Plan A would increase the selling price per unit from $8.00to $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 by104,000units.
At the end of 2016, Sheffield has45,000units 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 to72,000units. Each unit produced will cost $1.80in direct labor, $1.40in direct materials, and $1.20in variable overhead. The fixed overhead for 2017 should be $1,662,000.Display a production budget for 2017 under each plan.
Display a production budget for 2017 under each plan.
SHEFFIELDINDUSTRIES
Production Budget
December 31, 2017
For the Quarter Ending December 31, 2017
For the Year Ending December 31, 2017
Plan A
Plan B
Desired Ending Direct Materials
Total Materials Required
Expected Unit Sales
Direct Materials Purchases
Total Pounds Needed for Production
Total Required Units
Beginning Direct Materials
Required Production Units
Beginning Finished Goods Units
Desired Ending Finished Goods Units
Direct Materials per Unit
Add
Less
:
Total Pounds Needed for Production
Required Production Units
Total Materials Required
Direct Materials Purchases
Desired Ending Direct Materials
Desired Ending Finished Goods Units
Beginning Finished Goods Units
Expected Unit Sales
Direct Materials per Unit
Total Required Units
Beginning Direct Materials
Total Materials Required
Direct Materials Purchases
Desired Ending Finished Goods Units
Total Pounds Needed for Production
Direct Materials per Unit
Desired Ending Direct Materials
Required Production Units
Expected Unit Sales
Total Required Units
Beginning Direct Materials
Beginning Finished Goods Units
Add
Less
:
Beginning Direct Materials
Total Required Units
Total Materials Required
Direct Materials Purchases
Direct Materials per Unit
Beginning Finished Goods Units
Desired Ending Direct Materials
Desired Ending Finished Goods Units
Expected Unit Sales
Required Production Units
Total Pounds Needed for Production
Total Pounds Needed for Production
Expected Unit Sales
Direct Materials Purchases
Total Required Units
Beginning Direct Materials
Direct Materials per Unit
Beginning Finished Goods Units
Desired Ending Direct Materials
Desired Ending Finished Goods Units
Required Production Units
Total Materials Required
This question has a part c and d also.
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Audit Sampling
Authors: Ray Whittington, Dan M Guy, D R Carmichael
5th Edition
047137590X, 9780471375906
