Problem 20-7AA Merchandising: Preparation and analysis of cash budgets with supporting inventory and purchases budgets LO P4

[The following information applies to the questions displayed below.]

Aztec Company sells its product for $180 per unit. Its actual and budgeted sales follow.

	Units	Dollars
April (actual)	4,500	$810,000
May (actual)	3,400	612,000
June (budgeted)	5,500	990,000
July (budgeted)	7,500	1,350,000
August (budgeted)	4,200	756,000

All sales are on credit. Recent experience shows that 26% of credit sales is collected in the month of the sale, 44% in the month after the sale, 28% in the second month after the sale, and 2% proves to be uncollectible. The products purchase price is $110 per unit. All purchases are payable within 13 days. Thus, 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 19% of the next months unit sales plus a safety stock of 95 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,692,000 and are paid evenly throughout the year in cash. The companys minimum cash balance at month-end is $140,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $140,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 12% interest rate. On May 31, the loan balance is $47,500, and the companys cash balance is $140,000.

E connect introduction to Manag 2017: MW 10O0 AM Ch 20 Homework Problem 20-7AA Merchandising: Preparation and analysis of cash budgets with supporting inventon The following information appies to the quessions displayed below Artec Company selils its product for $180 per unt its ectual and budgeted sales tolow May lactus June (budgeted) July tbudgeted) August (budgeted 4 500 3.400 5.500 7.500 4.200 $810.000 612.000 990,000 42001350000 756.000 All sales are on credit Recent experience shows that 26% of credit se|es is colected in the month ofthe sele. 44% in the month after the sale 28% n the second month 6fter the sale, ond 2% proves to be uncolectible The product's purchase price is smo per nt An preneses ore peyebie within ta days Thus 60% of purchases made in month Spaid n that month ard tre other 40% s pad nte ret month, The company has a polcy to manten an ending monthly rventory of 19% ofthe next month's unit seles plus 6 safety stock of 95 units. The Aprt 30 and May 31 actuel inventory levels are consistent with this policy Selling end aaministrative expenses for the year are $1692.000 and are paid evenly throughout the year in cesh The compeny's minimum cesh balance at month-end is $140.000. This minimum is maintained. if necessary. by borrowing cesh from the bank if the balance exceeds $140.000, the company repays as much of the loen es t can without going below the minimum. This type of loen carmes an annual 12% interest rate. On May 31,the loan balance is $47500 and the company's cash beieance is $140.000 References Problem 20-7AA Merchandising Preparation and cesh budgets with supporting inventory and purc LO P4 Section Break