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Problem 1 3 - 6 3 ( Algo ) Budgeted Purchases and Cash Flows ( LO 1 3 - 3 , 4 , 5 )
Problem Algo Budgeted Purchases and Cash Flows LO
Oakley Wholesale Hardware and Supplies OWHS sells tools, lumber, and other remodeling supplies to commercial contractors. The company controller is compiling cash and other budget information for July, August, and September. On June the company had inventories of $
OWHS sells a wide variety of products, but for budgeting and inventory planning purposes, the company has developed a standard "unit" of inventory that reflects roughly the mix and purchase costs of the items found in inventory and expected sales volume. The inventory value of $ reported above is based on these inventory units. Each inventory unit is assumed to have a purchase price from vendors for planning purposes of $ This number is not expected to change in the next three months.
The budget is to be based on the following assumptions:
Each month's sales are billed on the last day of the month.
Customers are allowed a percent discount if payment is made within ditys after the billing date. Receivables are recorded in the accounts at their gross amounts not net of discounts
The billings are collected as follows: percent within the discount period, percent by the end of the month, and percent by the end of the following month. Two percent is uncollectible.
Purchase data are as follows:
For both purchases of inventory merchandise and selling, general, and administrative expenses, percent is paid in the month purchased and the remainder in the following month.
The number of units in each month's ending inventory equals percent of the next month's units of sales.
Selling, general, and administrative expenses, of which $ is depreciation, equal percent of the current month's sales.
Actual and projected sales follow:
tableDollars,UnitsMay$June
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