Complete the Modeling:
a. Sales Budget				Quarter Ended December 31, 2013
			September	October	November	December	Total		January	February
		Expected sales in units:	13,000	12,000	14,000	20,000	46,000		9,000	10,000
		Selling price per unit:	$60	$60	$60	$60	$60
		Total Sales:	$780,000	$720,000	$840,000	$1,200,000	$2,760,000
b. Cash Collections from:				Quarter Ended December 31, 2013
		Sales	% Collected	October	November	December	Total
	September sales:	$780,000	64% Collected	$499,200			$499,200
	October sales:	$720,000	32% Collected	230,400			230,400
	October sales:	$720,000	32% Collected		460,800		460,800
	November sales:	$840,000	0% Collected		268,800		268,800
	November sales:	$840,000	0% Collected			537,600	537,600
	December sales:	$1,200,000	0% Collected			384,000	384,000
		Total cash collections:		$729,600	$729,600	$921,600	$2,380,800
c. Production Budget				Quarter Ended December 31, 2013
	Finished Goods		% Budgeted	October	November	December	Total		January
		Beginning Inventory:		4,800	5,600	8,000	4,800		3,600
		Units to be produced:		12,800	16,400	15,600	44,800		9,400
		Goods available for sale:		17,600	22,000	23,600	49,600		13,000
		Desired ending inventory:	40% Budgeted	5,600	8,000	3,600	3,600		4,000
		Quantity of goods sold:		12,000	14,000	20,000	46,000		9,000
d. Materials Purchases Budget				October	November	December	Total		January
		Units to be produced:		12,800	16,400	15,600	44,800		9,400
		Pounds required for each unit:	5
		Total pounds used in production:		64,000	82,000	78,000	224,000		47,000
				Quarter Ended December 31, 2013
	Raw Materials		% Budgeted	October	November	December	Total
		Beginning Inventory:		19,200	24,600	23,400	19,200
		Purchases of materials:		69,400	80,800	68,700	218,900
		Materials available for use:		88,600	105,400	92,100	238,100
		Desired ending inventory:	30% Budgeted	24,600	23,400	14,100	14,100
		Total pounds used in production:		64,000	82,000	78,000	224,000
e. Cash Payments for:				October	November	December	Total
		Purchases of materials:		69,400	80,800	68,700	218,900
		Cost per pound of raw material:	$4.00
		Total cost of raw material purchases:		$277,600	$323,200	$192,360	$869,120
				Quarter Ended December 31, 2013
		Purchases	% Paid	October	November	December	Total
	September Net A/P:			$75,960			$75,960
	October purchases:	$277,600	70% Paid	194,320			194,320
	October purchases:	$277,600	70% Paid		83,280		83,280
	November purchases:	$323,200	0% Paid		226,240		226,240
	November purchases:	$323,200	0% Paid			96,960	96,960
	December purchases:	$192,360	0% Paid			192,360	192,360
		Total cash payments:		$270,280	$309,520	$289,320	$869,120

Question

a.

Assume that Freese, Inc. decided that because of strong economic conditions in general, a 10% increase in the
expected number of units to be sold each month was realistic. Explain the effect, in general, on each of the budgets
presented of a 10% increase in the number of units sold.

b. Assuming that the number of units sold would not change, explain the effect on the budgets presented of a 5% increase in the selling price of the product. How does this price change effect differ from the sales volume effect you described above?