Reference no: EM132625557

Question - Sheffield Industries had sales in 2016 of $6,960,000 and gross profit of $1,152,000. Management is considering two alternative budget plans to increase its gross profit in 2017.

Plan A would increase the selling price per unit from $8.00 to $8.40. Sales volume would decrease by 10% from its 2016 level. Plan B would decrease the selling price per unit by $0.50. The marketing department expects that the sales volume would increase by 104,000 units.

At the end of 2016, Sheffield has 45,000 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 72,000 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 $1,662,000.

Required - Display a sales budget for 2017 under each plan.