Question 1

Amway Company, a merchandising firm that sells one product, estimates it will sell 17,000 units of its product at $63 per unit in December. In November, the company prepared other information to prepare a budget for December, as shown here:

Merchandise inventory, December 1	2200 units
Desired merchandise inventory for December 31	2800 units
Cost per unit of merchandise purchases	$38.00
Selling and administrative expenses	$175,000.00
Cash balance, December 1	$42,000.00
November sales	$640,000.00

The company estimates that 60% of each month's sales are collected in the month of sale and that the remaining 40% is collected in the month after the sale.

The $175,000 of selling and administrative expenses includes $30,000 of depreciation.

the company pays for half of the merchandise purchases during the month of purchase and pays the remainder during the month following purchase. Estimated merchandise purchases for November are $384,000.

All other out-of-pocket expenses are paid for in cash.

Requirements

a) How many units of merchandise will Amway budget to purchase in December? What is the dollar amount of Amway's budgeted merchandise purchases for December?

b) Prepare a budgeted income statement for the month ended December for Amway Company.

c) Prepare a statement of estimated cash flows for the month ended December for Amway Company.

Merchandise Inventory:	Unit	Dollar Value
Inventory needs
Budgeted purchases