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

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