Original Data New Data to replace old data 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 Year 2 Quarter Year 3 Quarter Data 1 2 3 4 1 2 Budgeted unit sales 45,000 65,000 120,000 75,000 85,000 100,000 Selling price per unit $7 Data Year 3 Quarter 1 2 3 4 1 2 Budgeted Unit Sales 45,000 65,000 120,000 75,000 85,000 100,000 Selling Price Per Unit $7 00 Accounts Receivable, Beg Balance $65,000 Sales collected in the quarter sales are made 75 Sales collected in the quarter after sales are made 25 Desired Ending Finished Goods Inventory 30 of budgeted unit sales of next quarter Beginning Finished Goods Inventory 12,000 units Raw materials required to produce one unit 5 pounds Desired ending inventory of raw materials 10 of next quarter's production needs Beginning Raw Materials Inventory 23,000 pounds Raw Materials costs $0 80 per pound Raw Materials purchases are paid 60 in the quarter the purchases are made and 40 in the quarter following purchase Accounts Payable for raw materials, beginning balance $81,500 a What are the total expected cash collections for the year under this revised budget Expected cash collections for the year b What is the total required production for the year under this revised budget total required production for the year c What is the total cost of raw materials to be purchased for the year under this revised budget total cost of raw materials to be purchased for the year d What are the total expected cash disbursements for raw materials for the year under this revised budget Total expected cash disbursements for raw materials for the year 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 90,000 units in any one quarter Is this a potential problem No Yes

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Original Data: New Data to replace old data: Requirement 2: The company has just hired a new marketing manager who insists that unit sales can

Original Data:

New Data to replace old data:

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:

	Year 2 Quarter				Year 3 Quarter
Data	1	2	3	4	1	2
Budgeted unit sales	45,000	65,000	120,000	75,000	85,000	100,000
Selling price per unit	$7

Data					Year 3 Quarter
	1	2	3	4	1	2
Budgeted Unit Sales	45,000	65,000	120,000	75,000	85,000	100,000

Selling Price Per Unit	$7.00
Accounts Receivable, Beg. Balance	$65,000
Sales collected in the quarter sales are made	75%
Sales collected in the quarter after sales are made	25%
Desired Ending Finished Goods Inventory	30%	of budgeted unit sales of next quarter
Beginning Finished Goods Inventory	12,000	units
Raw materials required to produce one unit	5	pounds
Desired ending inventory of raw materials	10%	of next quarter's production needs
Beginning Raw Materials Inventory	23,000	pounds
Raw Materials costs	$0.80	per pound
Raw Materials purchases are paid	60%	in the quarter the purchases are made
and	40%	in the quarter following purchase
Accounts Payable for raw materials, beginning balance	$81,500

a. What are the total expected cash collections for the year under this revised budget?

Expected cash collections for the year: ?

b. What is the total required production for the year under this revised budget?

total required production for the year: ?

c. What is the total cost of raw materials to be purchased for the year under this revised budget?

total cost of raw materials to be purchased for the year: ?

d. What are the total expected cash disbursements for raw materials for the year under this revised budget?

Total expected cash disbursements for raw materials for the year: ?

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 90,000 units in any one quarter. Is this a potential problem?

Yes