The company has just hired a new marketing manager who insists that unit sales c
ID: 2424183 • Letter: T
Question
The company has just hired a new marketing manager who insists that unit sales can be dramatically increased by dropping the selling price from $8 to $7. The marketing manager would like to use the following projections in the budget:
1. What are the total expected cash collections for the year under this revised budget?
2. What is the total required production for the year under this revised budget?
3. What is the total cost of raw materials to be purchased for the year under this revised budget?
4. What are the total expected cash disbursements for raw materials for the year under this revised budget?
5.
After seeing this revised budget, the production manager cautioned that due to the current production constraint, a complex milling machine, the plant can produce no more than 80,000 units in any one quarter. Is this a potential problem?
Yes or No ?
1. What are the total expected cash collections for the year under this revised budget?
2. What is the total required production for the year under this revised budget?
3. What is the total cost of raw materials to be purchased for the year under this revised budget?
Explanation / Answer
1.
Cash collections for the year under the revised budget is as follows:
2.
Total required production for the year under revised budget is as follows:
-85,500
3. Raw material purchase budget is shown as under:
4. Expected cash disbursement is shown as under:
5.
This is not a potential problem as production can be more than 80,000 units also.
Schedule of Expected Cash Collections Quarter 1 2 3 4 Year Beginning AR $65,000 $65,000 Quarter 1 Sales (a) $ 262,500 $ 87,500 $350,000 Quarter 2 Sales (b) $ 341,250 $ 113,750 $455,000 Quarter 3 Sales (c) $ 551,250 $ 183,750 $735,000 Quarter 4 Sales (d) $ 393,750 $393,750 Total Collections $327,500 $428,750 $665,000 $577,500 $1,998,750