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Fact Pattern: Russon Corporation is a retailer whose sales are all made on credit. Sales are billed twice monthly, on the 10th of the month
Fact Pattern: Russon Corporation is a retailer whose sales are all made on credit. Sales are billed twice monthly, on the 10th of the month for the last half of the prior month's sales and on the 20th of the month for the first half of the current month's sales. The terms of all sales are 2/10, net/30. Based upon past experience, the collection of accounts receivable is as follows: Within the discount period On the 30th day Uncollectible 80% 18% 2% Russon's average markup on its products is 20% of the sales price. All sales and purchases occur uniformly throughout the month. The sales value of shipments for May and the forecasts for the next 4 months follow: May (actual) $500,000 June July 600,000 700,000 August September 700,000 400,000 Russon purchases merchandise for resale to meet the current month's sales demand and to maintain a desired monthly ending inventory of 25% of the next month's sales. All purchases are on credit with terms of net/30. Russon pays for 50% of a month's purchases in the month of purchase and 50% in the month following the purchase. How much merchandise should Russon plan to purchase during June? A. $500,000 B. $620,000 C. $480,000 D. $530,000
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