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A sales budget is given below for one of the products manufactured by the OMI Co. January 25,000 units February 40,000 units March 65,000 units
A sales budget is given below for one of the products manufactured by the OMI Co.
January | 25,000 units |
February | 40,000 units |
March | 65,000 units |
April | 45,000 units |
May | 35,000 units |
June | 30,000 units |
Additional information:
- Selling price is $20 per unit.
- All sales are on credit. 60% of the sales are collected in the month of sale and the remaining 40% in the month following the sale.
- The inventory of finished goods at the end of each month must equal 20% of the next month's sales. However, on December 31 the finished goods inventory total only 4,000 units.
- Each unit of product requires three pounds of specialized material. Since the production of this specialized material by OMI's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on January 1 of the current year.
- The specialized material costs $5 per pound. Payment to suppliers for material purchase is made 50% on the month of the purchase and 50% on the month after.
Required :
- Prepare a cash receipt (cash collection) budget for February-April.
- Prepare a cash payment (cash disbursement) budget for materials purchase for January, February, and March.
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