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Chapter 8: Applying Excel: Exercise (Part 2 of 2)

Requirement 2:

The company has just hired a new marketing manager who insiststhat unit sales can be dramatically increased by dropping theselling price from $8 to $7. The marketing manager would like touse the following projections in the budget:

	Year 2 Quarter					Year 3 Quarter
Data	1	2	3	4		1	2
Budgeted unit sales	50,000	65,000	115,000	75,000		80,000	95,000
Selling price per unit	$7

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Chapter 8: Applying Excel Data Year 3 Quarter 1 2 3 4 1 2 Budgeted unit sales 50,000 65,000 115,000 75,000 80,000 95,000 • Selling price per unit $7 per unit • Accounts receivable, beginningbalance $65,000 • Sales collected in the quarter salesare made 75% • Sales collected in the quarter aftersales are made 25% • Desired ending finished goodsinventory is 30% of the budgeted unit sales of the nextquarter • Finished goods inventory,beginning 12,000 units • Raw materials required to produce oneunit 5 pounds • Desired ending inventory of rawmaterials is 10% of the next quarter's productionneeds • 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 aremade and 40% in the quarter following purchase • Accounts payable for rawmaterials, beginning balance $81,500

a. What are the total expected cash collections for the yearunder this revised budget?

b. What is the total required production for the year under thisrevised budget?

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

d. What are the total expected cash disbursements for rawmaterials for the year under this revised budget?