1 The Sales Budget is Prepared as follows:

Year 2 Quarter
1 2 3 4 Year 2
Budgeted unit sales 40033 60033 100033 50033 250132
Selling Price per unit 8 8 8 8 8
Total Sales 320264 480264 800264 400264 2001056

Based on the budgeted sales above, the schedule of expected cash collection is prepared as follows:
Year 2 Quarter
1 2 3 4 Year 2
Begining accounts receivable 65000 65000
First-quarter sales 240198 120066 360264
Second-quarter sales 360198 120066 480264
Third-quarter sales 600198 200066 800264
Fourth-quarter sales 300198 300198
Total Cash Collection 305199 480266 720267 500268 2005990

2 Based on Sales budget in units, the production budget is prepared as follows:

Year 2 Quarter
1 2 3 4
Budgeted unit sales 40033 60033 100033 50033
Add desired ending finished goods inventory 18009.9 30009.9 15009.9 75039.6
Total needs 58042.9 90042.9 115042.9 125072.6
Less begining finished goods inventory 12000 18009.9 30009.9 15009.9
Required production 46042.9 72033 85033 110062.7

3 Based on the production budget, raw materials will need to be purchased during the year as follows:

Year 2 Quarter
1 2 3
Required production in units of finished goods 46042.9 72033 85033
Units of raw materials needed per unit of finished goods 5 5 5
Units of raw materials needed to meet production 230214.5 360165 425165
Add desired units of ending raw materials inventory 36016.5 42516.5 55031.35
Total Units of raw materials needed 266231 402681.5 480196.4
Less units of begining raw materials inventory 23000 36016.5 42516.5
Units of raw materials to be purchased 243231 366665 437679.9
Unit cost of raw materials 0.8 0.8 0.8
Cost of raw materials to be purchased 194584.8 293332 350143.9

Based on the raw materials purchases above, expected cash payments are computed as follows:
Year 2 Quarter
1 2 3 4 Year 2
Begining accounts payable 81500 81500
First-quarter purchases 116750.9 77833.92 194584.8
Second-quarter purchases 175999.2 117332.8 293332
Third-quarter purchases 210086.3 140057.6 350143.9
Fourth-quarter purchases 441108.9 441108.9
Total cash disbursement 198250.9 253833.1 327419.1 581166.4 1360670
red as follows:

Year 3 Quarter
Year 2 1 2
250132 70033 80033
21009.9 24009.9
271141.9 94042.9
75039.6 21009.9
196102.3 73033

year as follows:
Year 3
Quarter Quarter
4 Year 2 1
110062.7 196102.3 73033
5 5 5
550313.5 980511.5 365165
98051.15 36516.5
648364.7 1017028
55031.35 98051.15
593333.3 918976.9
0.8 0.8
474666.6 735181.5
1 Production budget:
July August September October
Budgeted unit sales 35033 40033 50033 30033
Add desired units of ending finished goods inventory 11006.6 13006.6 9006.6 7006.6
Total needs 46039.6 53039.6 59039.6 37039.6
Less units of beginning finished goods inventory 10000 11006.6 13006.6 9006.6
Required production in units 36039.6 42033 46033 28033

2 During July and August the company is building inventories in anticipation of peak sales in September.
Therefore, production exceeds sales during these months. In September and October inventories are
being reduced in anticipation of a forthcoming decrease in sales. Therefore, production is less than
sales during these months.

3 Direct materials budget:

July August September
Required production in units of finished goods 36039.6 42033 46033
Units of raw materials needed per unit of finished goods 3 3 3
Units of raw materials needed to meet production 108118.8 126099 138099
Add desired units of ending raw materials inventory 63049.5 69049.5 42049.5
Total units of raw materials needed 171168.3 195148.5 180148.5
Less units of beginning raw materials inventory 54000 63049.5 69049.5
Units of raw materials to be purchased 117168.3 132099 111099

As shown in part (1), production is greatest in September; however, as shown in the raw material budget,
purchases of materials are greatest a month earlier—in August. The reason for the large purchases of
materials in August is that the materials must be on purchases hand to support the heavy production
scheduled for September.
 November
20033

eptember.
tories are
ess than

Third
Quarter
124105.6
3
372316.8
42049.5
414366.3
54000
360366.3

aterial budget,
rchases of
production