• TabComp Ltd is a retail distributor for MZB-33 computer hardware and related software and support services. TabComp prepares sales forecasts of which the first six months of 2014 are presented here.
• Cash sales account for 25% of total sales, 30% of total sales are paid by bank credit card and the remaining 45% are on open account. The cash sales and cash from bank credit cards sales are received in the month of sale. Bank credit card sales are subject to a 4% discount. The cash receipts for sales on the open account are 70% in the month following the sale and 28% in the second month after the sale. The remaining accounts receivables are estimated to be uncollectible.
• TabComps month end inventory requirements for computer hardware units are 30% of the next months sales. TabComps purchase price for the computer units is 60% of the selling price.
• TabComp Ltd
• Sales Forecast for first six months of 2014
• Hardware SalesSoftware Sales & SupportTotal revenues
• Units $ $ $
• January 130 390,000 160,000 550,000
• February 120 360,000 140,000 500,000
• March 110 330,000 150,000 480,000
• April 90 270,000 130,000 400,000
• May 100 300,000 125,000 425,000
• June 125375,000225,000600,000
• Total 675 2,025,000 930,000 2,955,000

Required:

1. Calculate the cash that TabComp can expect to collect during April 2014. Show all calculations. (4 Marks)

2. TabComp is planning the purchase of MZB-33 computer hardware units for March 2014.

• a. Determine the number of units that will need to be purchased. (2 Marks)

b. Calculate the total costs of this purchase. (2 Marks)

3. As part of the annual budget process, TabComp prepares a cash budgert by month for the entire year. Explain why a company such as TabComp prepares a cash budget month by month for the entire year. (2 Marks)