Keggler’s Supply is a merchandiser of three different products. The company’s Fe
ID: 2571158 • Letter: K
Question
Keggler’s Supply is a merchandiser of three different products. The company’s February 28 inventories are footwear, 19,500 units; sports equipment, 81,500 units; and apparel, 49,000 units. Management believes each of these inventories is too high. As a result, a new policy dictates that ending inventory in any month should equal 29% of the expected unit sales for the following month. Expected sales in units for March, April, May, and June follow.
Required:
1. Prepare a merchandise purchases budget (in units) for each product for each of the months of March, April, and May.
Problem 22-6AA Merchandising: Preparation of cash budgets (for three periods) LO P4
During the last week of August, Oneida Company’s owner approaches the bank for a $106,500 loan to be made on September 2 and repaid on November 30 with annual interest of 17%, for an interest cost of $4,526. The owner plans to increase the store’s inventory by $60,000 during September and needs the loan to pay for inventory acquisitions. The bank’s loan officer needs more information about Oneida’s ability to repay the loan and asks the owner to forecast the store’s November 30 cash position. On September 1, Oneida is expected to have a $4,000 cash balance, $154,000 of net accounts receivable, and $100,000 of accounts payable. Its budgeted sales, merchandise purchases, and various cash disbursements for the next three months follow.
*Operations began in August; August sales were $200,000 and purchases were $120,000.
The budgeted September merchandise purchases include the inventory increase. All sales are on account. The company predicts that 23% of credit sales is collected in the month of the sale, 47% in the month following the sale, 19% in the second month, 7% in the third, and the remainder is uncollectible. Applying these percents to the August credit sales, for example, shows that $94,000 of the $200,000 will be collected in September, $38,000 in October, and $14,000 in November. All merchandise is purchased on credit; 70% of the balance is paid in the month following a purchase, and the remaining 30% is paid in the second month. For example, of the $120,000 August purchases, $84,000 will be paid in September and $36,000 in October.
Required:
Prepare a cash budget for September, October, and November. (Round your final answers to the nearest whole dollar.)
Problem 22-7AA Merchandising: Preparation and analysis of cash budgets with supporting inventory and purchases budgets LO P4
Aztec Company sells its product for $150 per unit. Its actual and budgeted sales follow.
All sales are on credit. Recent experience shows that 24% of credit sales is collected in the month of the sale, 46% in the month after the sale, 29% in the second month after the sale, and 1% proves to be uncollectible. The product’s purchase price is $110 per unit. 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 24% of the next month’s unit sales plus a safety stock of 95 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,920,000 and are paid evenly throughout the year in cash. The company’s minimum cash balance at month-end is $140,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $140,000, 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 $42,500, and the company’s cash balance is $140,000.
Required:
1. Prepare a schedule that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.
2. Prepare a schedule that shows the computation of budgeted ending inventories (in units) for April, May, June, and July.
3. Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of purchases for each month.
4. Prepare a schedule showing the computation of cash payments for product purchases for June and July.
5. Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month.
Prepare a schedule that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.
Prepare a schedule that shows the computation of budgeted ending inventories (in units) for April, May, June, and July.
Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of purchases for each month.
repare a schedule showing the computation of cash payments for product purchases for June and July.
Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month. (Do not round intermediate calculations. Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar value.)
Budgeted Sales in Units March April May June Footwear 14,500 25,500 30,500 33,500 Sports equipment 68,500 91,000 94,500 90,500 Apparel 40,500 38,000 33,500 24,000Explanation / Answer
A Particulars Footwear Sports equipment Apparel Opening Inventory - Feb 19500 81500 49000 Expected sales - March 14500 68500 40500 Inventory level to keep - March 4205 19865 11745 Excess inventory (Short) 795 -6865 -3245 Purchases budget for March 0 6865 3245 Opening Inventory - March 5000 19865 11745 Expected sales - April 25500 91000 38000 Inventory level to keep - April 7395 26390 11020 Purchase budget for April 27895 97525 37275 Opening Inventory - April 7395 26390 11020 Expected sales - May 30500 94500 33500 Inventory level to keep - May 8845 27405 9715 Purchase budget for May 31950 95515 32195 Opening Inventory - May 8845 27405 9715 Expected sales - May 33500 90500 24000 Inventory level to keep - May 9715 26245 6960 Purchase budget for June 34370 89340 21245 B Particulars September October November Opening Cash 4000 6600 12150 Cash Collection 149200 260050 386350 Cash Payment for Merchandise 84000 193500 214500 Other payments Payroll 19600 22000 23600 Rent 8000 8000 8000 Other cash expenses 35000 31000 20150 Repayment of bank loan - - 106500 Interest on bank loan - - 4526 Closing cash balance 6600 12150 21224 C-1 Percent Collected in April May June July August Credit sales from: April 24% 46% 29% 0% 0% May 0% 24% 46% 29% 0% June 0% 0% 24% 46% 29% July 0% 0% 0% 24% 46% August 0% 0% 0% 0% 24% Amount Collected in Total April May June July August Credit sales from: April 450,000 108,000.00 207,000.00 130,500.00 - - May 450,000 - 108,000.00 207,000.00 130,500.00 - June 825,000 - - 198,000.00 379,500.00 239,250.00 July 675,000 - - - 162,000.00 310,500.00 August 615,000 - - - - 147,600.00 AZTEC COMPANY Budgeted Ending Inventory For April, May, June and July C-2 April May June July Next month's budgeted sales (units) 3000 5500 4500 4100 Ratio of inventory to future sales 24% + 95 units 24% + 95 units 24% + 95 units 24% + 95 units Budgeted "base" ending inventory 815 1415 1175 1079
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.