4. Assume XYZ Manufacturing Company has already prepared its operating budget for 2021; however, Sam, the direct materials purchasing manager, has some updated information to be used in the budget. He has been under pressure to reduce the costs of direct materials and he has just negotiated a contract with a new supplier of plastic, a key direct material in the companys products. Under the terms of this contract, the new supplier will provide the company all its plastic in 2021 and they will charge the company a lower price for the plastic than the current supplier. Sam has provided this updated information on the expected price of plastic for the 2021 operating budget.

a. Use the table below in column (a) to state whether each of the parts of the operating budget will change as a result of this change in plastic supplier.

b. For the ones that will change, use column (b) to explain specifically how they will change (i.e., after the new information is incorporated into the operating budget, what exactly will be different on each part of the operating budget that you expect to change and how will it be different?)

(a) Will it change? (b) For the ones that change, explain specifically how it will change Operating budget parts Revenues budget Production budget Direct material usage budget Direct material purchases budget Direct labor cost budget Manufacturing overhead cost budget Budgeted unit cost of ending finished goods inventory Ending inventories budget Cost of goods sold budget Operating costs budget Budgeted income statement