The company just hired a new marketing manager who insists 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 $123412$

Budgeted unit sales $45,00065,000115,00075,00080,00090,000$

Selling price per unit $$7$

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

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

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

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

After seeing this revised budget, the production manager cautioned that due to the limited availability of a complex milling machine, the plant can produce no more than $90,000$ units in any one quarter. Is this a potential problem? Data Year $2$ Quarter Year $3$ Quarter

$123412$

Budgeted unit sales $40,00060,000100,00050,00070,00080,000$

$$ Selling price per unit $$8$ 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\mathrm{.}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$

Enter a formula into each of the cells marked with a $?$ below

Review Problem: Budget Schedules

Construct the sales budget Year $2$ Quarter Year $3$ Quarter

$123412$

Budgeted unit sales $40,00060,000100,00050,00070,00080,000$

Selling price per unit $$8$ $$8$ $$8$ $$8$ $$8$ $$8$

Total sales $$320,000$ $$480,000$ $$800,000$ $$400,000$ $$560,000$ $$640,000$

Construct the schedule of expected cash collections Year $2$ Quarter

$1234$ Year

Accounts receivable, beginning balance $$65,000$ $$65,000$

First$-$quarter sales $240,000$ $$80,000$ $$320,000$

Second$-$quarter sales $360,000$ $$120,000$ $$480,000$

Third$-$quarter sales $600,000$ $$200,000$ $$800,000$

Fourth$-$quarter sales $300,000$ $$300,000$

Total cash collections $$305,000$ $$440,000$ $$720,000$ $$500,000$ $$1,965,000$

Construct the production budget Year $2$ Quarter Year $3$ Quarter

$1234$ Year $12$

Budgeted unit sales $40,00060,000100,00050,000250,00070,00080,000$

Add desired finished goods inventory $18,00030,00015,00021,00021,00024,000$

Total needs $58,00090,000115,00071,000271,00094,000$

Less beginning inventory $12,00018,00030,00015,00012,00021,000$

Required production $46,00072,00085,00056,000259,00073,000$

Construct the raw materials purchases budget Year $2$ Quarter Year $3$ Quarter

$1234$ Year $1$

Required production $($units$)46,00072,00085,00056,000259,00073,000$

Raw materials required to produce one unit $555555$

Production needs $($pounds$)230,000360,000425,000280,0001,295,000365,000$

Add desired ending inventory of raw materials $($pounds$)36,00042,50028,000129,50036,500$

Total needs $($pounds$)266,000402,500453,000409,5001,331,500$

Less beginning inventory of raw materials $($pounds$)23,00036,00042,50028,00023,000$

Raw materials to be purchased $243,000366,500410,500381,5001,308,500$

Cost of raw materials per pound $$0\mathrm{.}80$ $$0\mathrm{.}80$ $$0\mathrm{.}80$ $$0\mathrm{.}80$ $$0\mathrm{.}80$

Cost of raw materials to be purchased $$194,400$ $$293,200$ $$328,400$ $$305,200$ $$1,046,800$

Construct the schedule of expected cash payments Year $2$ Quarter

$1234$ Year

Accounts payable, beginning balance $$81,500$ $$81,500$

First$-$quarter purchases $116,640$ $$77,760194,400$

Second$-$quarter purchases $175,920$ $$117,280293,200$

Third$-$quarter purchases $197,040$ $$131,360328,400$

Fourth$-$quarter purchases $$183,120183,120$

Total cash disbursements $$198,140$ $$253,680$ $$314,320$ $$314,480$ $$1,080,620$