Remington Industries had sales in 2012 of $6,400,000 and gross profit of $1,100,000.

Problem 23-3A

Remington Industries had sales in 2012 of $6,400,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit in 2013.

Plan A would increase the selling price per unit from $8 to $8.40. Sales volume would decrease by 5% from its 2012 level. Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 150,000 units.

At the end of 2012, Remington has 40,000 units of inventory on hand. If Plan A is accepted, the 2013 ending inventory should be equal to 5% of the 2013 sales. If Plan B is accepted, the ending inventory should be equal to 50,000 units. Each unit produced will cost $1.80 in direct labor, $2.00 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2013 should be $1,895,000.

 

Prepare a sales budget for 2013 under each plan.

Prepare a production budget for 2013 under each plan.

Compute the production cost per unit under each plan. (Round Unit cost to 2 decimal places, e.g. $25.28.)

Calculate the gross profit for each plan. (Round answers to 0 decimal places, e.g. $2,520.)

 

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