Requirement 2: The company has just hired a new marketing manager who insists th

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: Year 2 Quarter Year 3 Quarter Data Budgeted unit sales Selling price per unit 45,000 70,000 120,000 70,000 80,000 100,000 $7 1 Chapter 8: Applying Excel 3 Data 4 5 Budgeted unit sales 6 7- Selling price per unit Year 3 Quarter 4 45,000 70,000 120,000 70,000 80,000 100,000 7 per unit 8 $ 65,000 Accounts receivable, beginning balance Sales collected in the quarter sales are made Sales collected in the quarter after sales are made Desired ending finished goods inventory is Finished goods inventory, beginning Raw materials required to produce one unit Desired ending inventory of raw materials is Raw materials inventory, beginning Raw material costs 75% 25% 30% of the budgeted unit sales of the next quarter 10 12 12,000 units 5 pounds 10% of the next quarter's production needs 14 15 16 . 17 23,000 pounds 0.80 per pound 60% in the quarter the purchases are made 40% in the quarter following purchase Raw materials purchases are paid 18 and 19 Accounts payable for raw materials, beginning balance$ $81,500

Explanation / Answer

A)Sales : Total unit sold *revised selling price

              [45000+70000+120000+70000]*7

                   305000*7

                2135000

Cash collection : [Sales *% of collection ] +Beginning receivable

              = [2135000* .75 ] +65000

              = 1601250+65000

             = 1666250

B)Units to produced =Units sales + [quarter 3 sales *%desired ending inventory ] -beginning inventory

               = 305000 + [80000*.30] - 12000

                = 305000 + 24000-12000

               = 317000 units

c) Next quarter Production (in units) = 80000+ [100000*.30]-[80000*.30]

                  86000

Material consumption : 86000*5 =430000

Material purchased : [Units produced * consumption per unit ] +[Material consumption next year quarter sales*% ]-beginning

            = [317000*5]+[430000*.10]-23000

         = 1585000+ 43000-23000

            = 1605000 pounds

cost of material purchased : 1605000*.80= 1284000

d)Cash disbursement for purchase =[Purchase *% payment ] +beginning accounts payable

                  [ 1284000* .60 ] +81500

                 =851900

e)yes ,as quarter 3 of year 2 has production requirement of more than 90000 units .

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