Problem 5-35 Crane Products, a rapidly growing distributor of home gardening equ

Question

Problem 5-35

Crane Products, a rapidly growing distributor of home gardening equipment, is formulating its plans for the coming year. Carol Jones, the firm’s marketing director, has completed the following sales forecast.

Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. He has gathered the following information.

Crane maintains a minimum cash balance of $50,000. If the cash balance is less than $50,000 at the end of the month, the company borrows against its 12% line of credit in order to maintain the balance. All borrowings are made at the beginning of the month, and all repayments are made at the end of the month (in increments of $1,000). Accrued interest is paid in full with each principal repayment. The projected cash balance on April 1 is $50,000.

Prepare the purchases budget for the second quarter. (Round answers to 0 decimal places, e.g. 5,275. Enter answers in necessary fields only. Leave other fields blank. Do not enter 0.)

April

May

June

Total Purchases

April COGS

May COGS

June COGS

Month Sales Month Sales January $900,000 July $1,500,000 February $1,000,000 August $1,500,000 March $900,000 September $1,600,000 April $1,150,000 October $1,600,000 May $1,250,000 November $1,500,000 June $1,400,000 December $1,700,000

Explanation / Answer

Purchase Budget April May June Total April COGS [1150000*.40]*.30=138000 138000 May COGS [1250000*.40]*.70=350000 [1250000*.40]*.30=150000 500000 June COGS [1400000*.40]*.70= 392000 [1400000*.40]*.30= 168000 560000 jULY COGS [1500000*.40]*.70=420000 420000 Total 488000 542000 588000 1618000

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