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	50,000	65,000	115,000	75,000		85,000	100,000
Selling price per unit	$7

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

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

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

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

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

• No

2 3 Data Year 3 Quarter 4 1 2 3 4 1 2 5 Budgeted unit sales 50,000 65,000 115,000 75,000 85,000 100,000 6 $ 7 per unit $ 65,000 9 75% 25% 30% of the budgeted unit sales of the next quarter 12,000 units 7 Selling price per unit 8 Accounts receivable, beginning balance Sales collected in the quarter sales are made 10 Sales collected in the quarter after sales are made 11 Desired ending finished goods inventory is 12 Finished goods inventory, beginning 13 . Raw materials required to produce one unit 14 Desired ending inventory of raw materials is 15 - Raw materials inventory, beginning 16 Raw material costs 17 . Raw materials purchases are paid 18 and 19 Accounts payable for raw materials, beginning balance $ 5 pounds 10% of the next quarter's production needs 23,000 pounds 0.80 per pound 60% in the quarter the purchases are made 40% in the quarter following purchase 81,500