Question
Pacific Inc. sells windows for residential homes. The company started operations on July 1, 2019. The actual sales for July and the estimated sales for
Pacific Inc. sells windows for residential homes. The company started operations on July 1, 2019. The actual sales for July and the estimated sales for the following three months are as follows:
Month Sales (in units)
July - Actual Sales 22,000
August - Estimated Sales 34,000
September - Estimated Sales 28,000
October - Estimated Sales 24,000
Pacific sells the windows for $250 each. Cash is collected as follows: 50% in the month of sale and 45% in the month following the sale. The remainder is deemed uncollectible (bad debt). The company's policy is to have a finished goods inventory at the end of each month equal to 20% of the next months sales. The windows are purchased from a wholesaler company at a cost of $150 each. Cash disbursements for purchases are made as follows: 60% in the month of purchase, 40% in the month following the purchase.
Required:
Aug Cash Collection:
Sales rev for Aug: 50% x 34,000 x $250 = $ 4,250,000
45% x 22,000 x $250 = $ 2,475,000
$ 4,250,000 + $ 2,475,000 = $ 6,725,000
Total August Collection $ 6,725,000
Sept Cash Collection:
Sales rev for Sept: 50% x 28,000 x $250 = $3,500,000
45% x 34,000 x $ 250 = $ 3,825,000
$3,500,000 + $ 3,825,000 = $ 7,325,000
Total September Collection $ 7,325,000
d) Calculate the estimated Cost of Goods Sold for the month of September. (Show your work)
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