Splish Industries had sales in 2021 of $5,560,000 and gross profit of $1,097,000. 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 10% from its 2021 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 2021, Splish has 39,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be equal to 5% of the 2022 sales. If Plan B is accepted, the ending inventory should be equal to 59,000 units. Each unit produced will cost $1.60 in direct labour, $1.30 in direct materials, and $1.10 in variable overhead. The fixed overhead for 2022 should be $1,878,000.

(a)

Prepare a sales budget for 2022 under each plan.

SPLISH INDUSTRIES Sales Budget For the Year Ending December 31, 2022
		Plan A		Plan B
Expected sales in units
Unit selling price
Total sales

(b)

Prepare a production budget for 2022 under each plan.

(c)

Compute the production cost per unit under each plan.

(d)

Calculate the gross profit for each plan.

(e)

which plan should be accepted?