Moorcroft C

ompany$$s budgeted sales and direct materials purchases are as follows:

Budgeted Sales Budgeted D$.$M$.$ Purchases

April $$300,000$ $$45,000$

May $320,00054,000$

June $370,00060,000$

Moorcroft$$s sales are $40\%$ cash and $60\%$ credit. Credit sales are collected $20\%$ in the month of sale, $50\%$ in the month following sale, and $26\%$ in the second month following sale; $4\%$ are uncollectible. Moorcroft$$s purchases are $50\%$ cash and $50\%$ on account. Purchases on account are paid $40\%$ in the month following the purchase and $60\%$ in the second month following the purchase.

Instructions

$($a$)$ Prepare a schedule of expected collections from customers for June.

$($b$)$ Prepare a schedule of expected payments for direct materials for June.

$($c$)$ Moorcroft$$s assistant controller suggested that Moorcroft hire a part time collector to encourage customers to pay more promptly and to reduce the amount of uncollectible accounts. Sales are still $40\%$ cash and $60\%$ credit but the assistant controller predicted that this would cause credit sales to be collected $30\%$ in the month of the sale, $50\%$ in the month following sale, and $18\%$ in the second month following sale; $2\%$ are uncollectible.

$(1)$ Prepare a schedule of expected collections from customers for June. Evaluate how did these changes impact cash collections? Would it be worth paying the collector $$1,000$ per month?

$($d$)$ The assistant controller also suggested that the company switch their purchases to $40\%$ cash and $60\%$ on account to help stretch out their cash payments. There is no additional interest charge to do this and Moorcroft is still paying their bills on time. There is no change to the company$$s payment pattern.

$(1)$ Prepare a schedule of expected payments for direct materials for June.

Evaluate how did these changes impact the cash payments for June?