Question 9 Colt Industries had sales in 2019 of $5,560,000 and gross profit of $1,098,000. Management is considering two alternative budget plans to increase its gross profit in 2020 Plan A would increase the selling price per unit from $8.00 to $8.40. Sales volume would decrease by 10% from its 2019 level. Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 100,000 units At the end of 2019, Colt has 37,000 units of inventory on hand. If Plan A is accepted, the 2020 ending inventory should be equal to 5% of the 2020 sales. If Plan B is accepted, the ending inventory should be equal to 66,000 units. Each unit produced will cost $1.60 in direct labour, $1.30 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2020 should be $1,898,000. Prepare a sales budget for 2020 under each plan. COLT INDUSTRIES Sales Budget For the Year Ending December 31, 2020 Plan A Plan B Expected sales in units Unit selling price Total sales Calculate the gross profit under each plan. (Round answers to O decimal places,e.g. 125.) COLT INDUSTRIES Budgeted Gross Profit For the Year Ending December 31, 2020 Plan A Plan B Expected sales Budgeted cost of goods sold Gross profit Which plan should be accepted? should be accepted