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CompUSA Inc. sells computer hardware. It also markets related software and software-support services. The company prepares annual forecasts for sales, of which the first six
CompUSA Inc. sells computer hardware. It also markets related software and software-support services. The company prepares annual forecasts for sales, of which the first six months of 2019 are given belovw. In a typical month, total sales are broken down as follows: cash sales, 30%; VISAR credit card sales, 65%, and 5% open account (the company's own charge accounts) For budgeting purposes, assume that cash sales plus bank credit card sales are received in the month of sale, bank credit card sales are subject to a 3% processing fee, which is deducted daily at the time of deposit into CompUSA's cash account with the bank. Cash receipts from collection of accounts receivable typically occur as follows: 20% in the month of sale, 50% in the month following the month of sale. and 27% in the second month following the month of sale. The remaining receivables generally turn out to be uncollectible CompUSA's month-end inventory requirements for computer hardware units are 30% of the following month's estimated sales. A one-month lead time is required for delivery from the hardware distributor. Thus, orders for computer hardware units are generally placed by CompUSA on the 25th of each month to ensure availability in the store on the first day of the month needed. These units are purchased on credit under the following terms: n/45. measured from the time the units are delivered to CompUSA. Assume that CompUSA takes the maximum amount of time to pay its invoices. On average, the purchase price for hardware units runs 60% of selling price
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