Answer:
a. What are the total expected cash collections for the year under this revised budget?
65 + 236.25 + 78.75 + 367.5 + 122.5 + 551.25 + 183.75 + 367.5 = 1,972.5 x $1,000 = $1,972,500
b. What is the total required production for the year under this revised budget?
52.5 + 80.5 + 94.5 + 76 = 303.5 x 1,000 = 303,500 units
c. What is the total cost of raw materials to be purchased for the year under this revised budget?
237 + 367.5 + 507.5 + 360 = 1,472 x 1,000 = 1,472,000 pounds x $0.80 = $1,177,600
d. What are the total expected cash disbursements for raw materials for the year under this revised budget?
195.26 + 252.24 + 361.2 + 330.4 = 1,139.1 x $1,000 = $1,139,100
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 80,000 units in any one quarter. Is this a potential problem?
No, since total budgeted sales for the year are 303,500 units, which divided by 4 quarters = 75,875 units per quarter. All you need to do is increase quarter 1 production by 15,000 units, and that would satisfy quarters 2 and 3 needs.
Explanation:
Year 2 Quarter Year 3 Quarter
1 2 3 4 1 2
unit sales 45 70 105 70 90 100
(in thousands)
total sales 315 490 735 490 630 700
(in thousands)
cash collected 65 78.75 122.5 183.75 122.5 157.5
(in thousands) 236.25 367.5 551.25 367.5 472.5 525
75% of sales are collected during this quarter and 25% are collected the next quarter
beginning $65,000
ending finished inventory 30% of budgeted sales for next quarter
Year 2 Quarter Year 3 Quarter
1 2 3 4 1 2
beginning 13.5 21 31.5 21 27 30
ending 21 31.5 21 27 30 ?
quarter sales 45 70 105 70 90 100
production 52.5 80.5 94.5 76 93 ?
cost of raw materials = $0.80, 5 pounds per unit produced
beginning inventory of raw materials = 23,000 pounds
desired ending inventory of raw materials = 10% of next quarter's needs
Year 2 Quarter Year 3 Quarter
1 2 3 4 1 2
beginning 23 35 52.5 35 45 50
ending 35 52.5 35 45 50 ?
quarter needs 225 350 525 350 450 500
raw materials 237 367.5 507.5 360 455 ?
60% of raw materials cost paid during the quarter, 405 paid the next quarter
beginning accounts payable 81.5
Year 2 Quarter Year 3 Quarter
1 2 3 4 1 2
past q $ 81.5 75.84 117.6 162.4 112 114
next q $ 75.84 117.6 162.4 112 114 ?
quarter needs 189.6 294 406 280 360 ?
payments 195.26 252.24 361.2 330.4 358 ?
