The company has just hired a new marketing manager who insists that unit sales c
ID: 2557372 • 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:
a.What are the total expected cash collections for the year under this revised budget? (in $)
b.What is the total required production for the year under this revised budget?( in units)
c.What is the total cost of raw materials to be purchased for the year under this revised budget?
d.What are the total expected cash disbursements for raw materials for the year under this revised budget?
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 or no)
a.What are the total expected cash collections for the year under this revised budget? (in $)
b.What is the total required production for the year under this revised budget?( in units)
c.What is the total cost of raw materials to be purchased for the year under this revised budget?
d.What are the total expected cash disbursements for raw materials for the year under this revised budget?
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 or no)
1 Chapter 7: Applying Excel 2 3 Data 4 5 Budgeted unit sales Year 2 Quarter 2 65,000 Year 3 Quarter 50,000 105,000 65,000 85,000 100,000 $8 per unit 7Selling price per unit 8Accounts receivable, beginning balance 9 .Sales 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 14 Desired ending inventory of raw materials is 15. Raw materials inventory, beginning 16Raw material costs 17 . Raw materials purchases are paid 18 and 19.Accounts payable for raw materials, beginning balance 20 $65,000 75% 25% 30% of the 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
EXPECTED CASH COLLECTIONS Q-1 Q-2 Q-3 Q-4 TOTAL Accounts receivable in the beg. 65,000 65000 Q-1 Sales 300,000 100000 400000 Q-2 Sales 390000 130000 520000 Q-3 Sales 630,000 210,000 840000 Q-4 sales 390,000 390000 Total Cash Collections 365,000 490,000 760,000 600,000 2215000 PRODUCTION BUDGET Q-1 Q-2 Q-3 Q-4 TOTAL Q-1 Q-2 Budgeted Sales Units 50,000 65,000 105,000 65,000 285,000 85,000 100,000 Add: Desired Ending Finished inventory 19,500 31,500 19,500 25,500 25,500 30,000 Total Needs 69,500 96,500 124,500 90,500 310,500 115,000 Less: Beginning Finished Inventory 12,000 19,500 31,500 19,500 12,000 25,500 Required Production in units 57,500 77,000 93,000 71,000 298,500 89,500 RAW MATERIAL PURCHASE BUDGET Q-1 Q-2 Q-3 Q-4 TOTAL Q-1 Budgeted Production units 57,500 77,000 93,000 71,000 298,500 89,500 Raw material per unit 5 5 5 5 5 5 Total production needs 287,500 385,000 465,000 355,000 1,492,500 447,500 Add: Desired Ending Inventory 38,500 46,500 35,500 44,750 44,750 Total needs 326,000 431,500 500,500 399,750 1,537,250 Less: Beginning Inventory 23,000 38,500 46,500 35,500 23,000 Purchase Units 303,000 393,000 454,000 364,250 1,514,250 Cost price per unit 0.80 0.80 0.80 0.80 0.80 Budgeted Purchase in $ 242,400 314,400 363,200 291,400 1,211,400 EXPECTED CASH PAYMENTS Q-1 Q-2 Q-3 Q-4 TOTAL Beginning Accounts payable 81,500 81500 Q1 Purchases 145440 96960 242400 Q2 Purchases 188640 125760 314400 Q3 Purchases 217920 145,280 363200 Q4 Purchases 174,840 174840 Total Cash disbursement 226,940 285,600 343,680 320,120 1176340 Req 5: YES. When Production constraint is for 80,000 units, then it is a potential problem, as the Production of Q-3 exceeds the potential. Here the production manager has to adjust the excess production required in Q-3 over constraint units will have to be adjusted in earlieer Quarters.