The company has just hired a new marketing manager who insists that unit sales c
ID: 2483945 • 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:
Year 2 Quarter
Year 3 Quarter
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?
Requirement 2: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:
1Chapter 8: Applying Excel 3 Data 5 Budgeted unit sales 7Selling price per unit Year 2 Quarter Year 3 Quarter 4 70,000 45,000 70,000 105,000 90,000 100,000 $7 per unit $65,000 8Accounts receivable, beginning balance 9Sales collected in the quarter sales are made 10.Sales collected in the quarter after sales are made 11Desired ending finished goods inventory is 12 Finished goods inventory, beginning 13 Raw materials required to produce one unit 14Desired ending inventory of raw materials is 15 Raw materials inventory, beginning 16.Raw material costs 17Raw materials purchases are paid 18 and 19 .Accounts payable for raw materials, beginning balance 75% 25% 30% ofthe budgeted unit sales of the next quarter 12,000 units 5 pounds 10% of the next quarter's production needs 23,000 pounds $0.80 per pound 60% in the quarter the purchases are made 40% in the quarter following purchase $81,500Explanation / Answer
All Amounts in $ a. What are the total expected cash collections for the year under this revised budget? Year to be analysed under Revised Budget = Year 2 Quarter Quarter Quarter Quarter Total 1 2 3 4 Year Sales @ $ 7 per unit 315000 490000 735000 490000 2030000 Collections From Opening Accounts Receivable 65000 65000 From Current Quarter Sales 236250 446250 673750 551250 1907500 Total 301250 446250 673750 551250 1972500 b. What is the total required production for the year under this revised budget? FG Inventory in Units Quarter Quarter Quarter Quarter Total Year 3 - Quarter 1 1 2 3 4 Year Opening FG Inventory 12000 21000 31500 21000 12000 27000 Production Required 54000 80500 94500 76000 305000 93000 Sales 45000 70000 105000 70000 290000 90000 Closing FG Inventory 21000 31500 21000 27000 27000 30000 c. What is the total cost of raw materials to be purchased for the year under this revised budget? RM Inventory in Pounds Quarter Quarter Quarter Quarter Total 1 2 3 4 Year Opening RM Inventory 23000 40250 47250 38000 23000 Purchases of RM Inventory 287250 409500 463250 388500 1548500 RM used for Production of FG 270000 402500 472500 380000 1525000 Closing RM Inventory 40250 47250 38000 46500 46500 Cost per pound of RM 0.8 0.8 0.8 0.8 0.8 Total Costs for Purchases 229800 327600 370600 310800 1238800 d. What are the total expected cash disbursements for raw materials for the year under this revised budget? Quarter Quarter Quarter Quarter Total 1 2 3 4 Year Cash Disbursements for Purchases For Opening Accounts Payable 81500 81500 For Current Year Purchases 137880 288480 353400 334720 1114480 Total 219380 288480 353400 334720 1195980 e. 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 No Yes, this can be a potential problem, in that the collections from customers and payables to vendors, as well as the inventory cycle and consequently, the production and purchase cycle can be affected.