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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

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

The purchasing manager is evaluating an alternative supplier that would provide a slightly lower grade of raw
material at a savings from the current price of $4 per pound. The new price would be at $3.50 per pound but
the product would now require six pounds of the lower grade of raw material to produce the same number of
good finished units as currently achieved. Would you recommend the change to the new supplier? What if the
new price was to be $3.00? How about a price of $3.285307? Explain your answers.

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