Question
Pure Alliance Limited has a policy that it needs to keep 30% of the following months expected sales quantity as finished goods inventory at each
Pure Alliance Limited has a policy that it needs to keep 30% of the following months expected sales quantity as finished goods inventory at each period end to avoid potential hiccup that could cause loss of sales. The following are the expected sales quantities between January 20X0 and April 20X0. Average unit selling price is $50 each and average unit production cost is $25. 20X0 Jan Feb Mar Apr Sales Quantity 180,000 200,000 190,000 210,000 On average, 25% of the sales are settled in the same month, 30% in the following month and 44.5% are paid in the month after. The remaining 0.5% represents potential bad debts which will be written off at the year-end in December. (1) Calculate the Production requirement in March 20X0. (2) how much cash will be collected in March 20x0
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