Question

1. James Co. plans to sell 120,000 units during August. If the company has 23,000 units on hand at the start of the month, and plans to have 25,500 units on hand at the end of the month, how many units must be produced during the month?

2. Vulture Corporation produces and sells one product. The budgeted selling price per unit is $35. Budgeted unit sales for October, November, December, and January are 9,100, 8,700, 9,400, and 9,800 units, respectively. All sales are on credit with 25% collected in the month of the sale and 75% in the following month. Calculate the expected cash collections for December.

Answer 1

Ans.

1.

No. of Units to be Produced

Expected Sales + Units in hand at the end of month - Units on hand at the start of the month

No. of Units to be Produced = 120,000 + 25,500 - 23,000

No. of Units to be Produced = 122,500 Units

No. of Units to be Produced

122,500 Units

2.

Expected Cash Collection = 25% Cash Collected of Sales of December + 75% Cash Collected on Sales of November

Sales for the months of November and December

November

No. of Units Sold = 8,700

Sales Price = $ 35

Sales = 304,500

December

​No.of ​​​​​Units Sold  = 9,400 Units

Selling Price Per Unit = $35

Sales = 9,400 × $35 = $329,000

Cash Collection for December = 25% ($ 329,000) + 75% ( $ 304,500)

= $ 310,625

Cash Collection For December

$ 310,625