Question
It is November 1 of Year 1. Sales for a decorative supplies company for November, December, and January (of Year 2) are forecasted to be
It is November 1 of Year 1. Sales for a decorative supplies company for November, December, and January (of Year 2) are forecasted to be as follows:
- November: $200,000
- December: $800,000
- January: $200,000
On average, the cost of goods sold is 70% of sales. During this period, the company expects inventory levels to remain constant. This means that inventory purchases are expected to equal the amount of cost of goods sold.
100% of purchases are on credit. Of the credit purchases, 5% are paid during the month of the purchase, 65% in the month following the purchase, and 30% in the second month following the purchase.
Sales for September and October of Year 1 were $100,000 and $150,000, respectively.
What is the forecasted amount of total cash payments for purchases in January?
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