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

50,000

70,000

110,000

75,000

80,000

90,000

Selling price per unit

$7

per unit

Account receivable Opening Balance		65000
Sales collected in the Quarter Sale are made		75%
Sales collected in the next Quarter sale are made		25%
Desired finished good inventory is		30% of the budgeted unit sales of the next Quater
Finished goods inventory at the begening		12000 unit
Raw Material required to produced one unit		5 pounds
Desired ending enventory of raw material is		10% 0f the next quarter production needs
Raw material cost		.80 Per p
Raw material purchase are paid		60 %In the quarter puurchase are made
and		40 % in the quarter following purchase
Account payable for Raw material beginning balance		81500

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?

	Yes
	No