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Caddo is a retailer and all sales are billed monthly, on the 10th of the month for the prior month's sales. Collection of receivable is
Caddo is a retailer and all sales are billed monthly, on the 10th of the month for the prior month's sales. Collection of receivable is 80% within the month of billing, and the remainder by the end of the next month. Sales for May and the forecast for the next four months are: May (actual) $500,000; June $600,000; July, $700,000; August $700,000, and September $400,000. The average markup is 20 percent of sales. Purchases of merchandise for resale is made to meet the current month's sales-demand and to maintain a desired monthly ending inventory of 25 percent of the next month's sales. All purchases are on credit, and paid for 10% in the month of purchase, and 90% in the next month. How much should Caddo budget in August for merchandise payments?
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