Carla Vista Industries had sales in 2021 of $6,528,000 and gross profit of $1,056,000. 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 120,000 units 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 124,800 units. At the end of 2021, Carla Vista has 40,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 36,000 units. If Plan B is accepted, the ending inventory should be equal to 64,000 units. Each unit produced will cost $1.50 in direct labor, $1.30 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2022 should be $1,820,000.
Carla Vista Industries had sales in 2021 of $6,528,000 and gross profit of $1,056,000. 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 120,000 units 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 124,800 units. At the end of 2021, Carla Vista has 40,000 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 36,000 units. If Plan B is accepted, the ending inventory should be equal to 64,000 units. Each unit produced will cost $1.50 in direct labor, $1.30 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2022 should be $1,820,000.
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter16: Financial Planning And Forecasting
Section: Chapter Questions
Problem 14P: EXCESS CAPACITY Krogh Lumbers 2019 financial statements are shown here. Krogh Lumber: Balance Sheet...
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Part D of this question asks what the gross profit would be for each plan. I am having trouble computing. Can you show how to calculate gross profit under Plan A and Plan B?
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