Marsh industries had sales in 2013 of 6400000 and gross

Reference no: EM13594539

Marsh Industries had sales in 2013 of $6,400,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit in 2014.

Plan A would increase the selling price per unit from $8 to $8.40. Sales volume would decrease by 10% from its 2013 level. Plan B would decrease the selling price per unit by $.50. The marketing department expects that the sales volume would increase by 100,000 units.

At the end of 2013, Marsh has 38,000 units of inventory on hand. If Plan A is accepted, the ending inventory should be equal to 5% of the 2014 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, $1.30 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2014 should be $1,895,000.

A. Prepare a sales budget for 2014 under each plan.

B. Prepaare a production budget for 2014 under each plan.

Compute the production cost per unit under each plan.

Reference no: EM13594539

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