Show me your works!!! The company has just hired a new marketing manager who ins
ID: 2459811 • Letter: S
Question
Show me your works!!!
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:
Year 2 Quarter
Year 3 Quarter
Bugeted Unit sales : Year 2 Quarter 1= 50,000 2= 65,000 3= 115,000 4= 60,000
Year 3 Quarter 1= 90,000 2= 100,000
Selling price per unit = $8 per unit
Accounts receivable, beginning balance = $65,000
Sales collected in the quarter sales are made 75%
Sales collected in the quarter after are made 25%
Desired ending finished goods inventory is 30% of the budgeted unit sales of the next quarter
Finished goods inventory beginning 12,000 units
Desired ending inventory of raw materials is 10% of the next quarter's production needs
Raw materials inventory, beginning 23,000 pounds
Raw material cost $0.80 per pound
Raw materials purchases are paid 60% in the quarter the purchases are made and 40 % in the quarter following purchase
Accounts payable for raw materials, beginning balance $81,500
What are the total expected cash collections for the year under this revised budget?
What is the total required production for the year under this revised budget?
What is the total cost of raw materials to be purchased for the year under this revised budget?
What are the total expected cash disbursements for raw materials for the year under this revised budget?
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?
Show me your works!!!
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:
Explanation / Answer
1)
2)
Total required production = 305000 units
3)
4)
e) Yes, this is a potential problem. The production requirement in the third quarter is 98500 units. Therefore in that quarter the company cannot produce more than 80000 units which will not allow the company to reach its target sale for that quarter. Moreover, the last quarter production is exactly 80000 units. So that company cannot even produce the additional (98500 - 80000) 18500 units in that quarter to support the sale of additional 18500 units in the third quarter.
Collection from sales budget Year 1 Sales Accounts Receivable Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total $ 65,000.00 $ 65,000.00 quarter 1 $ 3,50,000.00 $ 2,62,500.00 $ 87,500.00 quarter 2 $ 4,55,000.00 $ 3,41,250.00 $ 1,13,750.00 quarter 3 $ 8,05,000.00 $ 6,03,750.00 $ 2,01,250.00 quarter4 $ 4,20,000.00 $ 3,15,000.00 $ 3,27,500.00 $ 4,28,750.00 $ 7,17,500.00 $ 5,16,250.00 $ 19,90,000.00