ACCT 2332 Requirement 2 The company has just hired a new mar

ACCT 2332

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 2 4 45,000 65,000 110,000 75,000 80,000 95,000 Budgeted unit sales Selling price per unit $7 per unit 1 Chapter 7: Applying Excel 3 Data Year 2 Quarter Year 3 Quarter 45,000 65,000 75,000 80,000 95,000 5 Budgeted unit sales 6 7 Selling price per unit 8Accounts receivable, beginning balance 9Sales collected in the quarter sales are madee 10.Sales collected in the quarter after sales are made 110,000 $8 per unit $65,000 75% 25% 30% of the budgeted unit sales of the next quarter Desired ending finished goods inventory is 12,000 units 2 Finished goods inventory, beginning 13.Raw materials required to produce one unit 14. Desired ending inventory of raw materials is 15.Raw materials inventory, beginning 16Raw material costs 17.Raw materials purchases are paid 18 and 19 Accounts payable for raw materials, beginning balance 20 5 pounds 10% of the next quarter\'s production needs 23,000 pounds $0.80 per pound 60% in the quarter the purchases are made 40% in the quarter following purchase $81,500 a. What are the total expected cash collections for the year under this revised budget? xpected cash collections for the year

Solution

Sales Budget Quarter 1 2 3 4 Budgeted unit sales 45000 65000 110000 75000 Selling Price Per unit $                               7.00 $                    7.00 $                  7.00 $                   7.00 Total sales $                  315,000.00 $       455,000.00 $     770,000.00 $      525,000.00 Schedule of expected cash collections Months Sales 1 2 3 4 Year Accounts receivable $                     65,000.00 $         65,000.00 $        65,000.00 1st Quarter Sales=($315000*75% in Ist Quarter and $315000 *25% in 2nd Quarter) $                  315,000.00 $       236,250.00 $       78,750.00 $      315,000.00 2nd Quarter Sales=($455000*75% in 2nd Quarter and $455000 *25% in 3rd Quarter) $                  455,000.00 $     341,250.00 $      113,750.00 $      455,000.00 3rd Quarter Sales=($770000*75% in 3rd Qarter and $770000*25% in 4th Quarter $                  770,000.00 $      577,500.00 $     192,500.00 $      770,000.00 4th Quarter Sales=($525000*75%) in 4th Quarter $                  525,000.00 $     393,750.00 $      393,750.00 Total Cash collections $               2,130,000.00 $       301,250.00 $     420,000.00 $      691,250.00 $     586,250.00 $ 1,998,750.00 Ans (a) Expected Cash Collection for the year $               1,998,750.00 Production Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year 1st Quarter Budgeted Unit Sales 45000 65000 110000 75000 295000 80000 Add:Ending Inventory=(650000*30%) in 1st Quarter,(110000*30% )in 2nd Quarter,(75000*30%) in 3rd Quarter,(80000*30%) in 4th Quarter 19500 33000 22500 20000 20000 28500 Total Needs 64500 98000 132500 95000 315000 108500 Less: Opening Inventory=12000 in 1st Quarter,Closing Stock of 1st Quarter is the beginning stock of 2nd Quarter, closing stock of 2nd Quarter is the beginning stock of 3rd Quarter and closig stock of 3rd Quarter is the beginning stock of 4th Quarter 12000 19500 33000 22500 12000 20000 Required Production 52500 78500 99500 72500 303000 88500 Ans (b) Total required production for the year 303000 Raw Material Purchase Budget 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year 1st Quarter Required Production 52500 78500 99500 72500 303000 88500 Raw Material required to produce one unit=5 Pounds 262500 392500 497500 362500 1515000 442500 Raw Material required for production 315000 471000 597000 435000 1818000 531000 Add: Ending Inventory 47100 59700 43500 53100 53100 Less: Beginning Inventory 23000 47100 59700 43500 23000 Budgeted Raw Material purchases 339100 483600 580800 444600 1848100 Cost Per Pound $                               0.80 $                    0.80 $                  0.80 $                   0.80 $                  0.80 Budgeted Raw Material Purchase Price $                  271,280.00 $       386,880.00 $     464,640.00 $      355,680.00 $ 1,478,480.00 Ans (C ) Total cost of raw material to be purchased $               1,478,480.00 Budgeted Cash disbursement of Mercendise Purchase Months 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Accounts Payable $                     81,500.00 $       81,500.00 ($271280*60%) in the 1st Quarter,($271280*40%) in 2nd Quarter, $                  162,768.00 $       108,512.00 $     271,280.00 ($386880*60%)in 2nd Quarter,($386880*40%) in 3rd Quarter $       232,128.00 $     154,752.00 $     386,880.00 ($464640*60%) in 3rd Quarter,($464640*40%) in 4th Quarter, $     278,784.00 $      185,856.00 $     464,640.00 ($355680*60%) in 4th quarter $      213,408.00 $     213,408.00 Total Cash Payments $                  244,268.00 $       340,640.00 $     433,536.00 $      399,264.00 $ 1,417,708.00 Ans (d ) Total Expected cash disbursement for raw material for the year $ 1,417,708.00 Ans (e ) Yes