Tried to do some of these and I know I did them wrong. Please help 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) | 1,800 | $288,000 |
June (budgeted) | 5,000 | $800,000 |
July (budgeted) | 4,000 | $799,000 |
August (budgeted) | 3,800 | $608,000 |
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, 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 a policy to maintain an ending monthly inventory of 22% of the next month’s unit sales plus a safety stock of 175 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,404,000 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 $42,500, and the company’s cash balance is $110,000.
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Solutions:
Computation of Cash receipts from sales | ||||||
Percent Collected in | ||||||
April | May | June | July | August | ||
Credits sales from: | ||||||
April | 28% | 42% | 24% | |||
May | 28% | 42% | 24% | |||
June | 28% | 42% | 24% | |||
July | 28% | 42% | ||||
August | 28% | |||||
Computation of Cash receipts from sales | ||||||
Amount Collected in | ||||||
Total | April | May | June | July | August | |
Credits sales from: | ||||||
April | $6,01,600 | $1,79,200 | $2,68,800 | $1,53,600 | ||
May | $2,70,720 | $80,640 | $1,20,960 | $69,120 | ||
June | $7,52,000 | $2,24,000 | $3,36,000 | $1,92,000 | ||
July | $5,59,300 | $2,23,720 | $3,35,580 | |||
August | $1,70,240 | $1,70,240 | ||||
Totals | $1,79,200 | $3,49,440 | $4,98,560 | $6,28,840 | $6,97,820 | |
Aztec Company | ||||||
Budgeted Ending Inventory | ||||||
April | May | June | July | |||
Next month's Budgeted sales (units) | 1800 | 5000 | 4000 | 3800 | ||
Ratio of inventory to Future sales (percent) | 22% | 22% | 22% | 22% | ||
Budgeted "base" ending inventory | 396 | 1100 | 880 | 836 | ||
Safety Stock | 175 | 175 | 175 | 175 | ||
Budgeted Ending Inventory | 571 | 1275 | 1055 | 1011 | ||
Aztec Company | ||||||
Merchandise Purchase Budget | ||||||
May | June | July | ||||
Budgeted Ending Inventory | 1275 | 1055 | 1011 | |||
Add: Budgeted sales units | 1800 | 5000 | 4000 | |||
Required units of available merchandise | 3075 | 6055 | 5011 | |||
Less: Beginning Inventory | 571 | 1275 | 1055 | |||
Budgeted purchases (Units) | 2504 | 4780 | 3956 | |||
Budgeted Cost per unit | $110 | $110 | $110 | |||
Budgeted cost of merchandise purchases | $2,75,440 | $5,25,800 | $4,35,160 | |||
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 | $2,75,440 | $1,65,264 | $1,10,176 | |||
June | $5,25,800 | $3,15,480 | $2,10,320 | |||
July | $2,61,096 | $2,61,096 | ||||
Totals | $1,65,264 | $4,25,656 | $4,71,416 | |||
Aztec Company | ||||||
Cash Budget | ||||||
June and July | ||||||
June | July | |||||
Beginning cash balance | $1,10,000 | $1,10,000 | ||||
Cash receipts from sales | $4,98,560 | $6,28,840 | ||||
Total Cash available | $6,08,560 | $7,38,840 | ||||
Cash disbursements: | ||||||
Payment for purchases | $4,25,656 | $4,71,416 | ||||
Selling and administrative expenses | $1,17,000 | $1,17,000 | ||||
Interest expense | $496 | 1016 | ||||
Total Cash disbursements | $5,43,152 | $5,89,432 | ||||
Preliminary cash balance | $65,408 | $1,49,408 | ||||
Additional Loan (Loan repayment) | $44,592 | -$39,408 | ||||
Ending cash Balance | $1,10,000 | $1,10,000 | ||||
Loan Balance | ||||||
June | July | |||||
Loan Balance- Beginning of month | $42,500 | $87,092 | ||||
Additional Loan (Loan repayment) | $44,592 | -$39,408 | ||||
Loan Balance- End of month | $87,092 | $47,684 |
Tried to do some of these and I know I did them wrong. Please help Aztec...
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Show transcribed image text Problem 22-7AA Merchandising: Preparation and analysis of cash budgets with supporting inventory and purchases budgets LO P4 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) Units 4,000 1,800 5,500 4,500 4,100 Dollars $ 640,000 288,000 880,000 879,000 656,000 All sales are on credit. Recent experience shows that 26% of credit sales is collected in the month of the sale,...
Problem 22-7AA Merchandising: Preparation and analysis of cash budgets with supporting inventory and purchases budgets LO P4 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) 2,800 448,000 June (budgeted) 4,500 720,000 July (budgeted) 3,500 719,000 August (budgeted) 4,100 656,000 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...
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) 2,200 352,000 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....
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