Aztec Company sells its product for $150 per unit. Its actual
and budgeted sales follow.
Units | Dollars | ||
April (actual) | 4,500 | $ | 675,000 |
May (actual) | 2,600 | 390,000 | |
June (budgeted) | 6,000 | 900,000 | |
July (budgeted) | 5,000 | 899,000 | |
August (budgeted) | 4,200 | 630,000 | |
All sales are on credit. Recent experience shows that 30% of credit
sales is collected in the month of the sale, 40% in the month after
the sale, 26% in the second month after the sale, and 4% proves to
be uncollectible. The product’s purchase price is $110 per unit.
60% of purchases made in a month is paid in that month and the
other 40% is paid in the next month. The company has a policy to
maintain an ending monthly inventory of 18% of the next month’s
unit sales plus a safety stock of 50 units. The April 30 and May 31
actual inventory levels are consistent with this policy. Selling
and administrative expenses for the year are $1,500,000 and are
paid evenly throughout the year in cash. The company’s minimum cash
balance at month-end is $110,000. This minimum is maintained, if
necessary, by borrowing cash from the bank. If the balance exceeds
$110,000, the company repays as much of the loan as it can without
going below the minimum. This type of loan carries an annual 14%
interest rate. On May 31, the loan balance is $44,000, and the
company’s cash balance is $110,000.
Required:
4. Prepare a schedule showing the computation of
cash payments for product purchases for June and July.
5. Prepare a cash budget for June and July,
including any loan activity and interest expense. Compute the loan
balance at the end of each month.
Solutions:
Cash payment on product purchases (for June and July) | ||||
Percent paid in | ||||
May | June | July | ||
For Purchases in: | ||||
May | 60% | 40% | ||
June | 60% | 40% | ||
July | 60% | |||
Amount paid in | ||||
Total | May | June | July | |
For Purchases in: | ||||
May | $3,53,320 | $2,11,992 | $1,41,328 | |
June | $6,40,200 | $3,84,120 | $2,56,080 | |
July | $3,20,496 | $3,20,496 | ||
Totals | $2,11,992 | $5,25,448 | $5,76,576 | |
Aztec Company | ||||
Cash Budget | ||||
June and July | ||||
June | July | |||
Beginning cash balance | $1,10,000 | $1,10,000 | ||
Cash receipts from sales | $6,01,500 | $7,31,100 | ||
Total Cash available | $7,11,500 | $8,41,100 | ||
Cash disbursements: | ||||
Payment for purchases | $5,25,448 | $5,76,576 | ||
Selling and administrative expenses | $1,25,000 | $1,25,000 | ||
Interest expense | $513 | 1090 | ||
Total Cash disbursements | $6,50,961 | $7,02,666 | ||
Preliminary cash balance | $60,539 | $1,38,434 | ||
Additional Loan (Loan repayment) | $49,461 | -$28,434 | ||
Ending cash Balance | $1,10,000 | $1,10,000 | ||
Loan Balance | ||||
June | July | |||
Loan Balance- Beginning of month | $44,000 | $93,461 | ||
Additional Loan (Loan repayment) | $49,461 | -$28,434 | ||
Loan Balance- End of month | $93,461 | $65,028 |
Aztec Company sells its product for $150 per unit. Its actual and budgeted sales follow. Units...
Aztec Company sells its product for $160 per unit. Its actual and budgeted sales follow. Units Dollars April (actual) 5,000 $ 800,000 May (actual) 2,000 320,000 June (budgeted) 5,500 880,000 July (budgeted) 4,500 879,000 August (budgeted) 4,000 640,000 All sales are on credit. Recent experience shows that 26% of credit sales is collected in the month of the sale, 44% in the month after the sale, 26% in the second month after the sale, and 4% proves to be uncollectible....
Aztec Company sells its product for $170 per unit. Its actual and budgeted sales follow. Units Dollars April (actual) 4,500 $ 765,000 May (actual) 2,000 340,000 June (budgeted) 6,000 1,020,000 July (budgeted) 5,000 1,019,000 August (budgeted) 3,600 612,000 All sales are on credit. Recent experience shows that 24% of credit sales is collected in the month of the sale, 46% in the month after the sale, 25% in the second month after the sale, and 5% proves to be uncollectible....
Aztec Company sells its product for $160 per unit. Its actual and budgeted sales follow. Units Dollars April (actual) 5,000 $ 800,000 May (actual) 2,000 320,000 June (budgeted) 5,500 880,000 July (budgeted) 4,500 879,000 August (budgeted) 4,000 640,000 All sales are on credit. Recent experience shows that 26% of credit sales is collected in the month of the sale, 44% in the month after the sale, 26% in the second month after the sale, and 4% proves to be uncollectible....
Aztec Company sells its product for $190 per unit. Its actual and budgeted sales follow. Units Dollars April (actual) 8,000 $1,520,000 May (actual) 2,600 494,000 June (budgeted) 7,500 1,425,000 July (budgeted) 8,000 1,520,000 August (budgeted) 4,000 760,000 All sales are on credit. Recent experience shows that 28% of credit sales is collected in the month of the sale, 42% in the month after the sale, 27% in the second...
Aztec Company sells its product for $160 per unit. Its actual and budgeted sales follow. Units Dollars April (actual) 5,000 $ 800,000 May (actual) 2,000 320,000 June (budgeted) 5,500 880,000 July (budgeted) 4,500 879,000 August (budgeted) 4,000 640,000 All sales are on credit. Recent experience shows that 26% of credit sales is collected in the month of the sale, 44% in the month after the sale, 26% in the second month after the sale, and 4% proves to be uncollectible....
Aztec Company sells its product for $150 per unit. Its actual and budgeted sales follow. Units Dollars April (actual) 4,500 $ 675,000 May (actual) 2,600 390,000 June (budgeted) 6,000 900,000 July (budgeted) 5,000 899,000 August (budgeted) 4,200 630,000 All sales are on credit. Recent experience shows that 30% of credit sales is collected in the month of the sale, 40% in the month after the sale, 26% in the second month after the sale, and 4% proves to be uncollectible....
UnitsDollarsApril (actual)4,500$675,000May (actual)2,400 360,000June (budgeted)4,500 675,000July (budgeted)3,500 674,000August (budgeted)3,800 570,000 All sales are on credit. Recent experience shows that 20% of credit sales is collected in the month of the sale, 50% in the month after the sale, 24% in the second month after the sale, and 6% proves to be uncollectible. The product’s purchase price is $110 per unit. 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has...
Aztec Company sells its product for $190 per unit its actual and budgeted sales to low. Units Dollars $950,000 Aprill (actual) May (actual) June (budgeted) July (budgeted) August (budgeted) 5.000 2,000 7,500 6,000 4,300 380,000 1.425,000 1.140,000 817,000 All sales are on credit. Recent experience shows that 20% of credit sales is collected in the month of the sale, 50% in the month after the sale, 29% in the second month after the sale, and 1% proves to be uncollectible....
Aztec Company sells its product for $150 per unit. Its actual and budgeted sales follow. Units Dollars April (actual) 3,500 $ 525,000 May (actual) 2,400 360,000 June (budgeted) 5,500 825,000 July (budgeted) 4,500 824,000 August (budgeted) 4,400 660,000 All sales are on credit. Recent experience shows that 24% of credit sales is collected in the month of the sale, 46% in the month after the sale, 25% in the second month after the sale, and 5% proves to be uncollectible....
Aztec Company sells its product for $160 per unit. Its actual and budgeted sales follow. Units Dollars April (actual) 3,500 $ 560,000 May (actual) 2,800 448,000 June (budgeted) 4,500 720,000 July (budgeted) 3,500 719,000 August (budgeted) 3,700 592,000 All sales are on credit. Recent experience shows that 24% of credit sales is collected in the month of the sale, 46% in the month after the sale, 28% in the second month after the sale, and 2% proves to be uncollectible....