Question
A merchandising firm by the name of Star Wars Enterprises, had an inventory of 49,000 units on March 31, and it had gross accounts receivable
A merchandising firm by the name of Star Wars Enterprises, had an inventory of 49,000 units on March 31, and it had gross accounts receivable totaling $88,500. Sales, in units, have been budgeted as follows for the next four months:
April | 54,000 |
May | 65,000 |
June | 89,000 |
July | 85,000 |
To be enforced in April, Star Wars board of directors has established a policy that states that the inventory at the end of each month should contain 40% of the units required for the following month's budgeted sales. The purchase price is $1.78, and the company receives 5% discount for any quantity =<50,000 and 10% for the incremental quantity over 50,000.
$3.25 is the selling price per unit. One-Quarter of sales are paid for by customers in the month of the sale; the balance is collected in the following month. The company gives 3% discount for payment in the same month and 2% the following month when it is paid
Required:
- Prepare a merchandise purchases budget showing how many units should be purchased and the dollar value for
each of the months April, May, and June (show the average price paid per unit) (8 marks)
2. Prepare a schedule of expected cash collections for each of the months April, May, and June. (8 marks)
3. Compute the discount the company gave to its customers for each of the month April, May and June? (4 marks) (part 2 & 3 may be combined)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started