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. 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 24% of the next
month’s unit sales plus a safety stock of 95 units. The April 30
and May 31 actual inventory levels are consistent with this policy.
Selling and administrative expenses for the year are $1,440,000 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 11% interest rate. On May 31, the loan balance is $44,500,
and the company’s cash balance is $110,000.
1. Prepare a schedule that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.
Prepare a schedule that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.
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Solutions:
Computation of Cash receipts from sales | ||||||
Percent Collected in | ||||||
April | May | June | July | August | ||
Credits sales from: | ||||||
April | 26% | 44% | 26% | |||
May | 26% | 44% | 26% | |||
June | 26% | 44% | 26% | |||
July | 26% | 44% | ||||
August | 26% | |||||
Computation of Cash receipts from sales | ||||||
Amount Collected in | ||||||
Total | April | May | June | July | August | |
Credits sales from: | ||||||
April | $7,68,000 | $2,08,000 | $3,52,000 | $2,08,000 | ||
May | $3,07,200 | $83,200 | $1,40,800 | $83,200 | ||
June | $8,44,800 | $2,28,800 | $3,87,200 | $2,28,800 | ||
July | $6,15,300 | $2,28,540 | $3,86,760 | |||
August | $1,66,400 | $1,66,400 | ||||
Totals | $2,08,000 | $4,35,200 | $5,77,600 | $6,98,940 | $7,81,960 | |
Aztec Company | ||||||
Budgeted Ending Inventory | ||||||
April | May | June | July | |||
Next month's Budgeted sales (units) | 2000 | 5500 | 4500 | 4000 | ||
Ratio of inventory to Future sales (percent) | 24% | 24% | 24% | 24% | ||
Budgeted "base" ending inventory | 480 | 1320 | 1080 | 960 | ||
Safety Stock | 95 | 95 | 95 | 95 | ||
Budgeted Ending Inventory | 575 | 1415 | 1175 | 1055 | ||
Aztec Company | ||||||
Merchandise Purchase Budget | ||||||
May | June | July | ||||
Budgeted Ending Inventory | 1415 | 1175 | 1055 | |||
Add: Budgeted sales units | 2000 | 5500 | 4500 | |||
Required units of available merchandise | 3415 | 6675 | 5555 | |||
Less: Beginning Inventory | 575 | 1415 | 1175 | |||
Budgeted purchases (Units) | 2840 | 5260 | 4380 | |||
Budgeted Cost per unit | $110 | $110 | $110 | |||
Budgeted cost of merchandise purchases | $3,12,400 | $5,78,600 | $4,81,800 | |||
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 | $3,12,400 | $1,87,440 | $1,24,960 | |||
June | $5,78,600 | $3,47,160 | $2,31,440 | |||
July | $2,89,080 | $2,89,080 | ||||
Totals | $1,87,440 | $4,72,120 | $5,20,520 | |||
Aztec Company | ||||||
Cash Budget | ||||||
June and July | ||||||
June | July | |||||
Beginning cash balance | $1,10,000 | $1,10,000 | ||||
Cash receipts from sales | $5,77,600 | $6,98,940 | ||||
Total Cash available | $6,87,600 | $8,08,940 | ||||
Cash disbursements: | ||||||
Payment for purchases | $4,72,120 | $5,20,520 | ||||
Selling and administrative expenses | $1,20,000 | $1,20,000 | ||||
Interest expense | $408 | 545 | ||||
Total Cash disbursements | $5,92,528 | $6,41,065 | ||||
Preliminary cash balance | $95,072 | $1,67,875 | ||||
Additional Loan (Loan repayment) | $14,928 | -$57,875 | ||||
Ending cash Balance | $1,10,000 | $1,10,000 | ||||
Loan Balance | ||||||
June | July | |||||
Loan Balance- Beginning of month | $44,500 | $59,428 | ||||
Additional Loan (Loan repayment) | $14,928 | -$57,875 | ||||
Loan Balance- End of month | $59,428 | $1,553 |
Aztec Company sells its product for $160 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 $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 $160 per unit. Its actual and budgeted sales follow. Units Dollars April (actual) 4,000 $ 640,000 May (actual) 2,000 320,000 June (budgeted) 5,000 800,000 July (budgeted) 4,000 799,000 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....
Help Aztec Company sells its product for $160 per unit. Its actual and budgeted sales follow April (actual) May (actual) June (budgeted) July (budgeted) August (budgeted) 4,000 2.000 5.000 4.000 4,000 Dollars $ 640,000 320,000 800,000 799,000 640,000 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....
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....
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) 4,000 $ 640,000 May (actual) 2,200 352,000 June (budgeted) 4,500 720,000 July (budgeted) 3,500 719,000 August (budgeted) 3,600 576,000 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 month after the sale, and 3% 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) 2,000 320,000 June (budgeted) 5,000 800,000 July (budgeted) 4,000 799,000 August (budgeted) 4,400 704,000 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, 24% in the second month after the sale, and 6% proves to be uncollectible....
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....