The company has just hired a new marketing manager who insists that unit sales c
ID: 2548091 • 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:
Explanation / Answer
Answer a Sales Budget Year 2 Year 3 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total Qtr 1 Qtr 2 Sales in Units 45,000 70,000 105,000 70,000 290,000 85,000 95,000 Sp Per Unit 7 7 7 7 7 7 7 Total Sales in $ 315,000 490,000 735,000 490,000 2,030,000 595,000 665,000 Schedule of Expected Cash Collections from Sales Year 2 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total Collection from Accounts Receivables Accounts Receivables - Year 1 65,000 65,000 Qtr 1 Sales 236,250 78,750 315,000 Qtr 2 Sales 367,500 122,500 490,000 Qtr 3 Sales 551,250 183,750 735,000 Qtr 4 Sales 367,500 367,500 Total cash Collections 301,250 446,250 673,750 551,250 1,972,500 Answer b. Production Budget Year 2 Year 3 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total Qtr 1 Qtr 2 Sales In units 45,000 70,000 105,000 70,000 290,000 85,000 95,000 Add: Ending Inventory in units 21,000 31,500 21,000 25,500 25,500 28,500 Total Needs 66,000 101,500 126,000 95,500 315,500 113,500 Less: Begnning Inventory in units (12,000) (21,000) (31,500) (21,000) (12,000) (25,500) Required Production in Units 54,000 80,500 94,500 74,500 303,500 88,000 Answer c. Raw Material Purchase Budget Year 2 Year 3 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total Qtr 1 Qtr 2 Required Production in Units 54,000 80,500 94,500 74,500 303,500 88,000 - Raw Material Required per unit in pounds 5 5 5 5 5 5 Total Raw Material Required in Pounds 270,000 402,500 472,500 372,500 1,517,500 440,000 Add: Ending Inventory in Pounds 40,250 47,250 37,250 44,000 44,000 Total Needs 310,250 449,750 509,750 416,500 1,561,500 Less: Beginning Inventory in Pounds (23,000) (40,250) (47,250) (37,250) (23,000) Required Raw Material Purchased in pounds 287,250 409,500 462,500 379,250 1,538,500 Raw Material Cost Per pound 0.80 0.80 0.80 0.80 0.80 Raw Material Purchased (in $) 229,800 327,600 370,000 303,400 1,230,800 Answer d. Schedule of Cash payments For Raw Materials Year 2 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total Cash Payment Accounts Payable - Year 1 81,500 81,500 Q1 Purchases 137,880 91,920 229,800 Q2 Purchases 196,560 131,040 327,600 Q3 Purchases 222,000 148,000 370,000 Q4 Purchases 182,040 182,040 Total Cash Payment to Suppliers 219,380 288,480 353,040 330,040 1,190,940 Answer e Yes