Required information

Skip to question

The Chapter 8 Form worksheet is to be used to create your own worksheet version of the Review Problem in the text.

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	45,000	65,000	120,000	75,000		80,000	95,000
Selling price per unit	$7

Chapter 8:

Applying Excel

Data Year 1 2 3 4 and year 3 Quarter 1 2 Budgeted unit sales 45,000 65,000 120,000 75,000 80,000 95,000 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 90,000 units in any one quarter. Is this a potential problem?