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Q2-A: Oman Corporation has adopted the following policies regarding merchandise purchases and inventory. At the end of any month, the inventory should be $20,000 plus
Q2-A: Oman Corporation has adopted the following policies regarding merchandise purchases and inventory. At the end of any month, the inventory should be $20,000 plus 85% of the cost of goods to be sold during the following month. The cost of merchandise sold averages 55% of sales. A given month's purchases are paid as follows: 20% during that month, 40% during the following month, and the rest in the month after . Purchases in may had been $150,000 and the inventory on May 31st was higher than planned at $210,000. Sales are expected to be June, $300,000, July, 350,000, August, 450,000, and September, 490,000. Required: Prepare purchases budget (BP) for the budget horizon of June to August and the disbursements for purchases. Q2-B: Abu Dhabi Enterprise was preparing its sales budget for the 1st quarter of 2021. Forecast sales are as follows (in thousands): Jan = 200,000; Feb = 220,000; March = 240,000. Sales are 80% on credit and 20% cash. 50% of the credit accounts are collected in the month of sale, 40% in the month following the sale, and 10% in the month after. Accounts receivable at the beginning of 2021 are 96,000,000 (10% of Nov. credit sales of 180,000,000 and 50% of Dec. credit sales of 156,000,000). Required: Prepare a schedule showing sales budget and cash collection for the budget horizon (Jan - March 2021)
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