Q1. At March 31, ABC Enterprises, a merchandising firm, had an inventory of 38,000 units, and it had accounts receivable totalling $85,000. Sales, in units, have been budgeted as follows for the next four months:

April 60,000 May 75,000 June 90,000 July 81,000

ABC's board of directors has established a policy to commence in April that the inventory at the end of each month should contain 40% of the units required for the following month's budgeted sales.

The selling price is $2 per unit. One-third of sales are paid for by customers in the month of the sale, the balance is collected in the following month.

Required:

a. Prepare a merchandise purchases budget showing how many units should be purchased for each of the months April, May, and June.

b. Prepare a schedule of expected cash collections for each of the months April, May, and June.