Question

Badlands, Inc. manufactures a household fan that sells for $25 per unit. All sales are on account, with 40 percent of sales collected in the month of sale and 60 percent collected in the following month. The data that follow were extracted from the company's accounting records. • Badlands maintains a minimum cash balance of $28,000. Total payments in January 20x1 are budgeted at $225,000. • A schedule of cash collections for January and February of 20x1 revealed the following receipts for the period: From December 31 accounts receivable From January sales From February sales Cash Receipts January February $129,000 95,000 $155,000 74,400 • March 20x1 sales are expected to total 10,000 units. • Finished-goods inventories are maintained at 25 percent of the following month's sales. • The December 31, 20xo, balance sheet revealed the following selected figures: cash, $24,400; accounts receivable, $129,000; and finished goods, $25,200.

Answer 1

3. First quarter sales:

January sales ($95,000+155,000)	$250,000
February sales (74,400/40%)	186,000
March sales (10,000*$25)	250,000
Total sales revenue	$686,000

6. Finished goods to be manufactured in January:

Finished goods to be manufactured = Sales + Ending finished goods - Beginning finished goods

Finished goods to be manufactured = 10,000 (250,000/$25) + 1,860 (186,000/$25*25%) - 2,500 (10,000*25%)

Finished goods to be manufactured = 9,360 units

7. Financing required in January:

Ending cash balance in January = Total cash available - cash payments

Ending cash balance in January = $24,400 (beginning cash balance) + 224,000 (cash receipts) - 225,000 (cash payments)

Financing required in January = $28,000 (minimum cash balance) - 23,400 = $4,600