Hill Industries had sales in 2016 of $6,800,000 and gross profit of $1,100,000. Management is considering two
Question:
The marketing department expects that the sales volume would increase by 100,000 units.
At the end of 2016, Hill has 40,000 units 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 to 60,000 units. Each unit produced will cost $1.80 in direct labor, $1.40 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2017 should be $1,895,000.
Instructions
(a) Prepare a sales budget for 2017 under each plan.
(b) Prepare a production budget for 2017 under each plan.
(c) Compute the production cost per unit under each plan. Why is the cost per unit different for each of the two plans? (Round to two decimals.)
(d) Which plan should be accepted? (Hint: Compute the gross profit under each plan.)
Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
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Related Book For
Accounting Principles
ISBN: 978-1118875056
12th edition
Authors: Jerry Weygandt, Paul Kimmel, Donald Kieso
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