Question

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 Rodgeted unit les Selling price per unit 45.000 0.000 105,00 0,00 0,00 95.000 Chapter: Applying Excal Budged unilates 45,000 70,000 105,000 60,000 3 2 -Soling price per un Accounts receivable beging balance Ses collected in the quarters are made 10. Ses collected in the area s are made 11 Desired ending ished goods inventory is 12. Finished goods inventory beging 2.Raw material required to produce one un Desired ending inventory of raw material is Row e ntory beginning 16 Raw material costs 12 Raw material purchases are paid perunt 65.000 75% 25% 30% of the budgeted unt sales of the next 12.000 pounds 10% of the nest quarter production needs 23.000 pounds 0.00 per pound in the quarter the purchases are made 40% in the water towing purcha 81,500 $ Accounts payable for ww manera, bewang balance $ a. What are the total expected cash collections for the year under this revised budget? de colection for

Answer 1

Solution a:

Schedule of expected cash collection
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Accounts receivables beginning	$65,000.00				$65,000.00
Cash received for Q1 Sale	$236,250.00	$78,750.00			$315,000.00
Cash received for Q2 Sale		$367,500.00	$122,500.00		$490,000.00
Cash received for Q3 Sale			$551,250.00	$183,750.00	$735,000.00
Cash received for Q4 Sale				$315,000.00	$315,000.00
Budgeted Cash Collection	$301,250.00	$446,250.00	$673,750.00	$498,750.00	$1,920,000.00

Solution b:

Production Budget
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year	Quarter 1, next year
Budgeted sales unit	45000	70000	105000	60000	280000	85000
Add: ending inventory (30% of next quarter sales)	21000	31500	18000	25500	25500	28500
Less: Beginning inventory	12000	21000	31500	18000	12000	25500
Estimated production unit	54000	80500	91500	67500	293500	88000

Solution c:

Budgeted Cost of raw material purchases
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Budgeted Production units	54000	80500	91500	67500	293500
Raw material per unit (In Pounds)	5	5	5	5	5
Total requirement of raw materials	270000	402500	457500	337500	1467500
Add: Desired ending inventory (10% of next quarter production needs)	40250	45750	33750	44000	44000
Less: Beginning inventory	23000	40250	45750	33750	23000
Budgeted purchase units of raw material (In Pounds)	287250	408000	445500	347750	1488500
Raw material cost per pound	$0.80	$0.80	$0.80	$0.80	$0.80
Budgeted cost of purchases	$229,800.00	$326,400.00	$356,400.00	$278,200.00	$1,190,800.00

Solution d:

Schedule of expected cash disbursement for merchandise purchases
Particulars	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Year
Accounts Payable, Beginning	$81,500.00				$81,500.00
Q1 Purchases	$137,880.00	$91,920.00			$229,800.00
Q2 Purchases		$195,840.00	$130,560.00		$326,400.00
Q3 Purchases			$213,840.00	$142,560.00	$356,400.00
Q4 Purchases				$166,920.00	$166,920.00
Total payments	$219,380.00	$287,760.00	$344,400.00	$309,480.00	$1,161,020.00

Solution e:

Yes, this is a potential problem as budgeted production for quarter 2 and 3 is exceeding 80000 units.