The Oxford COmpany Has budgeted sales revenus as follow. OCT NOV DEC Cash Sales

Question

The Oxford COmpany Has budgeted sales revenus as follow.

                          OCT         NOV        DEC

Cash Sales    72,000       204,000   156,000

Total Sales   192,000       300,000   228,000

Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit, with 60% paid in the month of purchase and 40% in the month following purchase. Budgeted inventory purchases are $260,00 in Octrober, $180,000 in November, and $84,000 in December.

Use this inormation to prepare a schedule of expected cash payments for purchases of inventory for the months of November and December only.

Explanation / Answer

Hi,

Please find the answer as follows:

Notes:

Nov: 40% in the following month = 260000 (October Purchases)*.40 = 104000

Dec: 40% in following month = 180000(November Purchases)*.40 = 72000

Thanks.

Nov Dec Purchase Value 180000 84000 Payments:

60% in the month of purchase 108000 50400 40% in the following month 104000 72000 Total Expected Cash Payments 212000 122400

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