Colt Industries had sales in 2008 of $6,400,000 and gross profit of $1,100,000

Colt Industries had sales in 2008 of $6,400,000 and gross profit of $1,100,000. Management is considering two alternative budget plans to increase its gross profit in 2009.
Plan A would increase its selling price per unit from $8.00 to $8.40. Sales volume would decrease by 5% from its 2008 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 2008, Colt has 40,000 of inventory on hand. If plan A is accepted, the 2009 ending inventory should be equal to 5% of the 2009 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, $1.25 in direct materials, and $1.20 in variable overhead. The fixed overhead for 2009 should be $1,895,000

A) Prepare a sales budget for 2009 under each plan
B)Prepare a production budget for 2009 under each plan
C) Compute the production cost per unit under each plan. Why is the cost per unit different for each of the two plans? (Round to two decimals)
D) Which plan should be accepted (Hint: Compute the gross profit under each plan)

Click here for the solution: Colt Industries had sales in 2008 of $6,400,000 and gross profit of $1,100,000

Dorough Pointers Inc. expects to begin operations in January 1, 2009

Problem 14-16 Preparing a Sales Budget and Schedule of Cash Receipts

Dorough Pointers Inc. expects to begin operations in January 1, 2009. Dorough expects sales in January 2009 to total $120,000 and to increase 10 percent per month in February and March. All sales are on account. Dorough expects to collect 70 percent of accounts receivable in the month of sale, 20 percent in the month following the sale, and 10 percent in the second month following the sale.

Required
a. Prepare a sales budget for the first quarter of 2009.
b. Determine the amount of sales revenue Dorough will report on the first 2009 quarterly pro forma income statement.
c. Prepare a cash receipts schedule for the first quarter of 2009.
d. Determine the amount of accounts receivable as of March 31, 2009.

Check:
c.Feb.: $116,400
March: $140,040

Click here for the solution: Dorough Pointers Inc. expects to begin operations in January1, 2009