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Refer to the following lease amortization schedule. The five payments are made annually starting with the beginning of the lease. A $2,800 purchase option is reasonably certain to be exercised at the end of the five-year lease. The asset has an expected economic life of eight year.
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 50,000 65,000 115,000 75,000 90,000 100,000
Selling price per unit $7
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Applying Excel
Data Year 3 Quarter
1 2 3 4 1 2
Budgeted unit sales 50,000 65,000 115,000 75,000 90,000 100,000
• 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 is the total cost of raw materials to be purchased for the year under this revised budget?
b. What are the total expected cash disbursements for raw materials for the year under this revised budget?