Montero Corporation, a merchandising company, has provided the following budget data:


 

	Purchases	Sales
January	$42,000	$72,000
February	48,000	66,000
March	36,000	60,000
April	54,000	78,000
May	60,000	66,000

Collections from customers are normally 70% in the month of sale, 20% in the month following the sale, and 9% in the second month following the sale. The balance is expected to be uncollectible. Montero pays for purchases in the month following the purchase. Cash disbursements for expenses other than merchandise purchases are expected to be $14,400 for May. Montero's cash balance on May 1 was $22,000.

Required:

a) Compute the expected cash collections during May.
b) Compute the expected cash balance on May 31. 

 

QUESTION 2

 

A sales budget is given below for one of the products manufactured by the OMI Co.:


 

January	25,000 units
February	40,000 units
March	65,000 units
April	45,000 units
May	35,000 units
June	30,000 units

The inventory of finished goods at the end of each month must equal 20% of the next month's sales. However, on December 31, the finished goods inventory totalled only 4,000 units.

Each unit of product requires three kilograms of specialized material. Since the production of this specialized material by OMI's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on January 1 of the current year.

Required
Prepare a budget showing the quantity of material to be 

purchased each month for January, February, and March, and in total for the quarter.