Question

Moorcroft Company’s budgeted sales and direct materials purchases are as follows:

Answer 1

Answer:

a) Month        Sales

April           $300,000

May            $320,000

June           $370,000

Schedule of expected collections

For the month of June, 202x

Cash sales during June = $370,000 x 40% = $148,000

Collection from June's credit sales = $222,000 x 30% = $66,600

Collection from May's credit sales = $192,000 x 40% = $76,800

Collection from April's credit sales = $180,000 x 26% = $46,800

Total cash collections during June = $338,200

b) Month        DM purchases

April           $45,000

May            $54,000

June           $60,000

Schedule of expected cash payments for direct materials purchases

For the month of June, 202x

Cash purchases during June = $60,000 x 50% = $30,000

Cash payments for May's purchases = $27,000 x 40% = $10,800

Cash payments for April's purchases = $22,500 x 60% = $13,500

Total cash payments during June = $54,300

c) Month        Sales

April           $299,000

May            $337,000

June           $387,000

Schedule of expected collections

For the month of June, 202x

Cash sales during June = $370,000 x 40% = $148,000

Collection from June's credit sales = $222,000 x 30% = $66,600

Collection from May's credit sales = $192,000 x 50% = $96,000

Collection from April's credit sales = $180,000 x 18% = $32,400

Total cash collections during June = $343,000

It would be worth to pay the collector since the 2% reduction in uncollectible accounts is worth much more than the $1,000 that he/she earns.

d) Month        DM purchases

April           $45,000

May            $54,000

June           $60,000

Schedule of expected cash payments for direct materials purchases

For the month of June, 202x

Cash purchases during June = $60,000 x 40% = $24,000

Cash payments for May's purchases = $32,400 x 40% = $12,960

Cash payments for April's purchases = $27,000 x 60% = $16,200

Total cash payments during June = $53,160