Part 2Constant Demand and Seasonal Budgets

1. The company has decided they needed to create a full set of budget schedules including financial statements for the first year of operations based on an assumption of constant demand of 18,000 quarterly and 72,000 for the first year (appendices B-1 through B-11).A second set of budget schedules and financial statements based on expected unit sales of 15,000 in quarter one, 25,000 in quarter two, 20,000 in quarter three, and finally 12,000 in quarter four for a total of 72,000 for the year based on a seasonal demand pattern (appendices C-1 through C-11).We expect the same quarterly sales patterns in year two meaning 18,000 units per quarter under constant demand and 15,000 units in quarter one under seasonal demand.

*Compare the constant demand to the seasonal demand budget.

*Explain the major differences in each of the budget schedules, cash budget and financial statements on both a quarterly and annual basis. Remember the beginning and ending raw material and finished goods inventory units will cause differences in the budgets but also focus on the differences between accrual and cash timing figures.

need B-6 / C-6 - Mfg. Overhead

pot is that the total current assets on the constant demand schedule add up to being around $7 million more than the total current assets on the seasonal demand schedule. See table ? below. Total Assets on Beginning Balance Sheet Cash Raw Materials Finished Total Assets Inventory Goods Inventory Constant Demand $25,000,000 $13,500,000 $32,860,200 $71,360,200 Seasonal Demand $25,000,000 $12,000,000 $27,383,500 $64,383,500 Table ?: See appendices B-1 and C-1 This is due to the fact that less units will be produced during the first quarter under seasonal 25 JUL . . .onal. demand shows lower production in quarters one and four and higher volume in quarters two and three. See table ? (whatever number would be next) below. Production Units Quarter Quarter Quarter Quarter Annual One Two Three Four Total Constant Demand 18,000 18,000 18,000 18,000 72,000 Seasonal Demand 16,000 24,500 19,200 12,300 72,000 Table ?: See appendices B-3 and C-3 B-4 / C-4 - Material Budget -WESTON The fourth pair of corresponding budgets is the constant and seasonal material budgets. The constant materials budget shows on average how much materials will be needed to meet the requirements of the quarterly demands. The seasonal budget will show the differences in 25 6 JUL 8