Reference no: EM132732402
Problem - Pronghorn Industries had sales in 2016 of $7,200,000 and gross pro?t of $1,158,000. Management is considering two alternative budget plans to increase its gross pro?t in 2017.
Plan A would increase the selling price per unit from $3.00 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 111,000 units.
At the end of 2016, Pronghorn 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 63,000 units. Each unit produced will cost $1.30 in direct labor, $1.40 in direct materials, and $1.20 in variable overhead. The ?xed overhead for 2017 should be $1,500,000.
Required - Prepare a sales budget for 2017 under each plan.
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: Pronghorn Industries had sales in 2016 of $7,200,000 and gross pro?t of $1,158,000. Prepare a sales budget for 2017 under each plan
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