Sedman, Corp., has projected the following sales for the coming year: Sales in t
ID: 2716407 • Letter: S
Question
Sedman, Corp., has projected the following sales for the coming year:
Sales in the year following this one are projected to be 15 percent greater in each quarter.
Calculate payments to suppliers assuming that the company places orders during each quarter equal to 30 percent of projected sales for the next quarter. Assume that the company pays immediately.
Calculate payments to suppliers assuming a 90-day payables period.
Calculate payments to suppliers assuming a 60-day payables period.
Sedman, Corp., has projected the following sales for the coming year:
Explanation / Answer
Year 0 Year 1 Year 2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Sales 870 950 910 1010 1162 1336 1536 1766 2031.471 Assumed figure Amount of order 401 461 530 609 30% of next quarter sales order for current quarter 813 935 1075 1237 70% of current quarter sales Payments to suppliers 1,214 1,396 1,605 1,846 30% of next quarter + 70% of this quarter Sales are expected to be 15% greater in each quarter in next year Company places order for 30% of projected sales in next quarter during the current quarter and pays immediately From the above, company places orders for 70% of current quarter requirements in the same quarter and pays immediately In case the suppliers are paid after 90 days. That is 30% ordered for Q2 in Q1 is paid in Q2 and 70% of Q2 ordered in Q2 will be paid in Q3 Year 0 Year 1 Year 2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Sales 870 950 910 1010 1162 1336 1536 1766 2031.471 Assumed figure Amount of order 348 401 461 530 609 30% of next quarter sale order for current quarter 707 813 935 1075 1237 70% of current quarter sales Payments to suppliers For order of next quarter 348 401 461 530 30% of current quarter ordered in previous quarter For order of current quarter 707 813 935 1075 70% amount of previous quarter Total Payments 1055 1214 1396 1605 In case the suppliers are paid after 60 days. Let us assume all the amounts are ordered at the beginning of the quarter Then the 30% of next quarter will be paid in this quarter and 70% of this quarter will also be paid in this quarter itself which is almost the same as the first example. However if there is monthly ordering, the calculations will be different but the same cannot The amount ordered in first month is paid in third month, second one in fourth month,third in fifth month, fourth in sixth month etc That is the first quarter will have 1/3rd of Q2 ordered payment 1/3rd of 70% pertaining to that quarter. Q2 will have 2/3rd of Q2 ordered in Q1 and 1/3 of Q3 ordered in Q2 for 30% and 2/3rds of Q1 and 1/3rd of Q2 for 70%. The calculations would be as follows Year 0 Year 1 Year 2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Sales 870 950 910 1010 1162 1336 1536 1766 2031.471 Assumed figure Amount of order 348 401 461 530 609 30% of next quarter sales order for current quarter 707 813 935 1075 1237 70% of current quarter sales Payments to suppliers 30% of next quarter + 70% of this quarter order for next quarter 366 421 484 556 2/3*previous quarter+1/3*current quarter order for current quarter 742 854 982 1129 2/3*previous quarter+1/3*current quarter Total Payment 1108 1274 1466 1685