Answer:
The Peoria Supply Company
a. Schedule of Estimated Cash Collections:
Cash collections: July
50% sales month $25,500
less 2% cash discount (510)
40% following month 16,800
8% second month 2,400
Total collections $44,190
b. A Schedule of Estimated July Cash Payments for Purchases
June July
Sales $42,000 $51,000
Ending inventory 18,000* 27,000
Beginning inventory 21,000 18,000*
Estimated Purchases 39,000 60,000
Payment for purchases:
50% purchase month $30,000
50% following month 19,500
Total payment for purchases $49,500
c. Selling and administrative expenses
Non-Cash expenses:
Depreciation expense $1,667
Cash disbursements:
Other fixed costs 5,333
Variable costs 6,375
Total costs $13,375
Explanation:
a) Data and Calculations:
Selling price per product = $30
Purchase cost per product = $20
Total sales dollars for next year = $720,000
Month Sales Revenue
May $30,000
June 42,000
July 51,000
August 54,000
July 1:
Cash balance = $20,000
Merchandise inventory $18,000
Accounts receivable (sales) 23,000
Accounts payable (purchases) 12,000
Ending inventory = $27,000 ($54,000 * 50%)
Ending inventory = 50% of next month's budgeted sales
Selling and administrative expenses (excluding bad debts) for the year = $180,000
Fixed costs = $90,000
Depreciation 20,000
Cash fixed costs = $70,000
Monthly fixed costs = $5,833
Variable costs = $90,000
Variable costs per sales dollars = $90,000/$720,000 = $0.125
Cash variable cost for July $0.125 * $51,000 = $6,375
a. Schedule of Estimated Cash Collections:
Cash collections: May June July August
$30,000 $42,000 $51,000 $54,000
50% sales month 15,000 21,000 25,500 27,000
less 2% cash discount (300) (420) (510) (540)
40% following month 16,800 20,400
8% second month 2,400 3,360
2% Uncollectible
