All sales are on credit. Recent experience shows that 28% of credit sales is col
ID: 2448028 • Letter: A
Question
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, 26% in the second month after the sale, and 4% proves to be uncollectible. The product’s purchase price is $110 per unit. All purchases are payable within 11 days. Thus, 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 20% 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 $1,572,000 and are paid evenly throughout the year in cash. The company’s minimum cash balance at month-end is $120,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $120,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 13% interest rate. On May 31, the loan balance is $37,000, and the company’s cash balance is $120,000.(Round final answers to the nearest whole dollar.)
Prepare a table showing the computation of cash payments on product purchases for June and July.
the table to fill in looks as follows
cash payments on product purchases for june and july
from purchases in percent paid in
May May June July
june
july
from purchases in total ammount paid in
may May june july
june
july
Aztec Company sells its product for $160 per unit. Its actual and projected sales follow.Explanation / Answer
Details April May June July August Sales units 3,500 2,200 6,500 6,000 3,800 Sales $ 560,000 352,000 1,040,000 960,000 608,000 Sales price 160 160 160 160 160 Ending inventory 440 1,300 1,200 760 - Safety stock 175 175 175 175 175 Total closing stock 615 1,475 1,375 935 175 Required Purchase for the month in Units 4,115 3,060 6,400 5,560 3,040 Purchase price /unit 110 110 110 110 110 Cash payment on product purchase in jun & jul Purchase cost for the month 452,650 336,600 704,000 611,600 334,400 Details April May June July August Total Payment of April purchase 271,590 181,060 452,650 Payment of May purchase 201,960 134,640 336,600 Payment of jun purchase 422,400 281,600 704,000 Payment of Jul purchase 366,960 244,640 611,600 271,590 383,020 557,040 648,560 244,640 2,104,850