Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following information applies to the questions displayed below.] Abacus Company sells its product for $200 per unit. Its actual and projected sales follow Units

image text in transcribedimage text in transcribed

The following information applies to the questions displayed below.] Abacus Company sells its product for $200 per unit. Its actual and projected sales follow Units 8,000$1,600,000 2,400 6,000 7,500 4,500 Dollars April (actual) May (actual) June (budgeted) July (budgeted) August (budgeted) 480,000 1,200,000 1,500,000 900,000 All sales are on credit. Recent experience shows that 30% of credit sales is collected in the month of the sale. 40% in the month after the sale, 25% in the second month after the sale, and 5% proves to be uncollectible. The product's purchase price is $110 per unit. All purchases are payable within 12 days. Thus, 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 18% of the next month's unit sales plus a safety stock of 155 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,548,000 and are paid evenly throughout the year in cash. The company's minimum cash balance at month-end is $87,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $87,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 13% interest rate. On May 31, the loan balance is $46,500, and the company's cash balance is $87,000

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing And Edp Objective Questions And Explanations

Authors: Irvin N. Gleim, William A. Hillison

5th Edition

0917537521, 978-0917537523

More Books

Students also viewed these Accounting questions

Question

what is it important to scale the inputs when using SVMs ?

Answered: 1 week ago

Question

recognise typical interviewer errors and explain how to avoid them

Answered: 1 week ago

Question

identify and evaluate a range of recruitment and selection methods

Answered: 1 week ago

Question

understand the role of competencies and a competency framework

Answered: 1 week ago