Problem 7-7AA Merchandising: Preparation and analysis of cash budgets with suppo
ID: 2547255 • Letter: P
Question
Problem 7-7AA Merchandising: Preparation and analysis of cash budgets with supporting inventory and purchases budgets LO P4 IThe following information applies to the questions displeyed below) Aztec Compony sells its product for $190 per unit ts actuel and budgeted soles follow April (odtuol) May lectuah June bucgetect July budgetec August budgeted 5.000 $950.000 3.000 8.000 1520000 6.000 4000 570000 1140 000 760.000 All sales are on creat Recent experience shows that 26% of geat sales it colleaed in the month of the sale. 44% in the month ofter the sale, 25% in the second month ster the sale, end 5% proves to be uncolleate The produas purchase price is $110 per unit All poses are payable within 14 days Thus é0% d prdeses moce in o month Is pid in that month end the corer 40% is pod in the next month The company has o picy to mortar on encing monthly inventory of 23% of the next month's unit sales plus a safety stock of 165 units The April 30 and May 31 aqual inventary levels ore consistent with this pcy Seling and admnistrative expenses for the yeor are $1.284000 and ere paid evenly throughour the year in cosh The campeny's minimum cash balance at month-end is $110,000. This minimum is meintainedt If necessary by borrowing cesh from the benk in the belance exceeds $110.000, the company repays as much of the loan os it con without going below the m nimm This type loan carries an annual 12% trterest rate On May 31, the loan balance is $42.000, end the compeny's cosh bslance is $110.000 ReferencesExplanation / Answer
Percent collected in April May June July August Credit sales from April 26.00 44.00 25.00 May 26.00 44.00 25.00 June 26.00 44.00 25.00 July 26.00 44.00 August 26.00 Amount collected in April May June July August Credit sales from Amount April 950000 247000 418000 237500 0 0 May 570000 0 148200 250800 142500 0 June 1520000 0 0 395200 668800 380000 July 1140000 0 0 0 296400 501600 August 760000 0 0 0 0 197600 Total 883500 1107700 Aztec Company Budgeted Ending Inventory For April, May, June and July April May June July August Next Month's Budgted sales(units) 3000 8000 6000 4000 Ratio of Inventory to future Sales 23% 23% 23% 23% Budgted "base" Ending Inventory 855 2005 1545 1085 Aztec Company Merchandise Purchase budget May June July Required units of available merchandise 5005 9545 7085 Less : beginning inventory 855 2005 1545 Budgeted purchases in units 4150 7540 5540 Per unit cost 110 110 110 Budgted cost of merchandise purchases 456500 829400 609400 Cash payment on product purchases for June & July Percent paid in May June July From Purchases in May 60% 40% June 60% 40% July 60% Amount paid in May June July From Purchases in Amount May 456500 273900 182600 0 June 829400 0 497640 331760 July 609400 0 0 365640 Total 680240 697400 Aztec Company Cash Budget June & July June July Beginning cash balance 110000 163840 Collection from sales 883500 1107700 Total cash available 993500 1271540 Cash payment for purchases 680240 697400 Selling & administrative expeses 107000 107000 Interest 420 0 Total Cash payment 787660 804400 Preliminary cash Balance 205840 467140 Borrowed/(repaid) -42000 0 Ending Cash balance 163840 467140 Loan Balance June July Loan Balance at beginning of the month 42000 0 Additional Loan(Loan Repayment) -42000 0 Loan Balance at the end of month 0 0