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Karmee Company has been accumulating operating data in order to prepare annual profit plan. Details regarding Karmee's sales for the first six months of the

Karmee Company has been accumulating operating data in order to prepare annual profit plan. Details regarding Karmee's sales for the first six months of the coming year are as follows:

Estimated Monthly SalesType of Monthly Sale

January $600,000Cash Sales20%

February$650,000Credit sales80%

March$700,000

April$625,000

May$720,000

June$800,000

Collection Pattern for Credit Sales

Month of sale30%

One month following sale40%

Second month following sale25%

Karmee's cost of goods sold averages 40 percent of the sales value. Karmee's objective is to maintain a target inventory equal to 30 percent of the next month's sales. Purchases of merchandise for resale are paid for in the month following the sale.

The amount of cash collected in March for Karmee Company from the sales made during March will be

A. P140,000 C. P350,000

B. P308,000 D. P636,000

Karmee Company's total cash receipts for the month of April will be

A. P504,000 C. P653,000

B. P629,000 D. P707,400

The purchase of merchandise that Karmee Company will need to make during February will be

A. P254,000 C. P266,000

B. P260,000 D. P338,000

The amount for cost of goods sold that will appear on Karmee Company's pro form income statement for the month of February will be

A. P195,000 C. P260,000

B. P254,000 D. P272,000

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