28

Assume the following budgeted information for a merchandising company:

• Budgeted sales (all on credit) for November, December, and January are $246,000, $216,000, and $207,000, respectively.
• Cash collections related to credit sales are expected to be 70% in the month of sale, 30% in the month following the sale.
• The cost of goods sold is 70% of sales.
• Each months ending inventory equals 20% of next months cost of goods sold.
• 40% of each months merchandise purchases are paid in the current month and the remainder is paid in the following month.
• Monthly selling and administrative expenses that are paid in cash in the month incurred total $24,000.
• Monthly depreciation expense is $8,000.

The budgeted net operating income for December would be:

Multiple Choice

• $40,800

• $32,800

• $26,892

• $34,892

27

Assume the following budgeted information for a merchandising company:

• Budgeted sales (all on credit) for November, December, and January are $246,000, $216,000, and $207,000, respectively.
• Cash collections related to credit sales are expected to be 70% in the month of sale, 30% in the month following the sale.
• The cost of goods sold is 70% of sales.
• Each months ending inventory equals 20% of next months cost of goods sold.
• 40% of each months merchandise purchases are paid in the current month and the remainder is paid in the following month.
• Monthly selling and administrative expenses that are paid in cash in the month incurred total $24,000.
• Monthly depreciation expense is $8,000.

The budgeted net operating income for December would be:

Multiple Choice

• $40,800

• $32,800

• $26,892

• $34,892

26

Assume the following budgeted information for a merchandising company:

• Budgeted sales (all on credit) for November, December, and January are $254,000, $224,000, and $215,000, respectively.
• Cash collections of credit sales are expected to be 70% in the month of sale and 30% in the month following the sale.
• The cost of goods sold is always 65% of sales.
• Each months ending inventory equals 15% of next months cost of goods sold.
• 40% of each months merchandise purchases are paid in the current month and the remainder is paid in the following month.
• Monthly selling and administrative expenses that are paid in cash in the month incurred total $28,000.
• Monthly depreciation expense is $27,500.

The expected cash collections from customers in December are:

Multiple Choice

• $221,300.

• $263,700.

• $247,285.

• $233,000.