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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

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:

Data Year 2 Quarter Year 3 Quarter
1 2 3 4 1 2
Budgeted unit sales 45,000 65,000 115,000 60,000 85,000 90,000
Selling price per unit $ 7

Chapter 8: Applying Excel
Data Year 3 Quarter
1 2 3 4 1 2
Budgeted unit sales 45,000 65,000 115,000 60,000 85,000 90,000
Selling price per unit $7 per unit
Accounts receivable, beginning 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 is 30% of the budgeted unit sales of the next quarter
Finished goods inventory, beginning 12,000 units
Raw materials required to produce one unit 5 pounds
Desired ending inventory of raw materials is 10% of the next quarter's production needs
Raw materials inventory, beginning 23,000 pounds
Raw material 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?

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 80,000 units in any one quarter. Is this a potential problem?

multiple choice

  • Yes

  • No

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