Question

1. Saxim Company expects to sell 30,000 units, 40,000 units, and 50,000 units in April, May, and June, respectively. If it has a policy of having 30% of the next month's sales on hand at the end of the month, the number of units to be purchased in May should be: 2. Credit sales for April, May, and June are $40,000, $60,000, and $30,000, respectively. Collection patterns are: 25% of any month's sales are collected the month of sale; 50% of any month's sales are collected the following month; and 20% of any month's sales are collected the second month following sale (the balance being uncollectible accounts). The cash collections in June from customers would be: 3. In May, June, and July, Ace Company expects unit sales of its only product to be 8,000, 12,000, and 6,000 respectively. If (1) Ace has a policy of having 30% of next month's sales on hand at the end of the month, (2) 60% of each month's purchases are paid in the month of purchase and 40% are paid the following month, and (3) each unit costs $7, cash payments in June for purchases would be:

Answer 1

1) Unit to be purchased = 40000+(50000*30%)-(40000*30%) = 43000 Units

2) Cash collection in June = (40000*20%+60000*50%+30000*25%) = $45500

3) May Purchase = 8000+(12000*30%)-(8000*30%) = 9200 Units

June Purchase = 12000+(6000*30%)-(12000*30%) = 10200 Units

Cash payment for June = (10200*7*60%)+(9200*7*40%) = $68600