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n the budget provided, we assumed that the average selling costs would be the same

as the average for the New England region. We also thought that these costs would be

evenly distributed over the year. We have learned, however, that the costs are not

evenly distributed and vary across regions. Please recalculate the budgeted selling

costs using the expected total $($$$300,000)$ and the expectations that we will sell

$1,000,000$ bats $($given in the original memo$).$

$$ No changes to the quantity of sales or to the production budget are anticipated.

$$ Wood prices are expected to be $15$ percent higher than the amount previously given

you. The wood market has been fairly volatile lately, as increasing environmental

regulations in the northwest have cut the supply.

$$ We have completed negotiation of a new labor contract, which will increase wages by

$4$ percent for the coming year. The new contract takes effect on March $1,2026.$

$$ Since all our competitors will face similar cost pressures, we believe we can increase

the selling price per bat by $$\mathrm{.}50$ without any loss of sales. We decided against a

bigger increase, thinking that an increase of more than $$\mathrm{.}50$ will cause a loss of sales,

either to our competitors in the wooden bat market, or to manufacturers of aluminum

bats.

$$ To help our cash flow, we have negotiated a contract with one of our wood suppliers.

In return for an exclusive contract $($this supplier will now supply all our wood$),$ the

supplier will guarantee the price of our wood for the full year $($at the level stated

above$)$ and will grant us $30-$day credit. Thus, we will not need to pay for a month$$s

wood purchases until the following month. This arrangement will begin with the

March purchases.

$$ Because of the risk connected with having a sole supplier, we have decided to

maintain an inventory of wood sufficient for the production of $75,000$ bats. We will

build this inventory in three equal installments during March, April, and May.

$$ We notice that, in the preliminary budget, there is a cash deficit at the end of March.

We realize that the amount may change as a result of the above factors, but w a deficit

may still exist. We have arranged with our bank to borrow $$450,000$ on March $1$ and

to repay it on May $31,$ at an annual interest rate of $12$ percent. All interest will be

paid when the loan is repaid.answer using excel

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