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Part I 55 marks The data below pertains to the third quarter of Ontario Company which manufactures toys. Below is the estimated sales (in units):
Part I 55 marks
The data below pertains to the third quarter of Ontario Company which manufactures toys.
Below is the estimated sales (in units):
July | 30,000 |
August | 60,000 |
September | 80,000 |
October | 40,000 |
November | 10,000 |
December | 20,000 |
- The selling price of the toys is $10 per unit.
- All sales are on account. Based on past experience, sales are collected in the following pattern:
Month of sale | 25% |
Month following sale | 70% |
Uncollectible | 5% |
- Sales for June totaled $400,000.
- The company maintains finished goods inventories equal to 20% of the following month's sales. This requirement will be met at the end of June.
- Each toy requires 3 pounds of raw materials.
- The company requires that the ending inventory of raw materials be equal to 20% of the following month's production needs.
- The raw material costs $1.50 per pound.
- 40% of a month's purchases of raw materials is paid for in the month of purchase; the remainder is paid for in the following month.
- The accounts payable on June 30 will be $80,000.
Required
- A schedule of expected cash collections (15 marks)
- A cash budget (20 marks)
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