Iron Man Products has projected the following sales for the coming year: Sales i

Question

Iron Man Products has projected the following sales for the coming year:

Sales in the year following this one are projected to be 10 percent greater in each quarter.

Calculate payments to suppliers assuming that Iron Man places orders during each quarter equal to 30 percent of projected sales for the next quarter. Assume that Iron Man pays immediately. (Round your answers to 2 decimal places. (e.g., 32.16))

Calculate payment to suppliers assuming a 90-day payables period.

Calculate payment to suppliers assuming a 60-day payables period. (Round your answers to 2 decimal places. (e.g., 32.16))

Iron Man Products has projected the following sales for the coming year:

Explanation / Answer

a. Calculation of payment to suppliers by iron man ( figures in $)

Working for a -

Purchase are 30% of next quarters sales so accordingly purchases are calculated for each. For last quarter i.e quarter 4 sales figure is not given but it is given that sales in every quarter is forcasted with an increase of 10% to previous quarter so accordingly 10% is added to Q3 sales to dervie Q4 sales.

b. Calculation of payment to suppliers by Iron man if there is 90 day payable period( figures in $)

Working for b -

Purchases would remain the same as in a above. But payment is made in 90 days credit period. So accordingly purchases in Q1 would be paid in Q4. But payable in Q1, Q2 and Q3 is yet to be calculated. And for the same it is given that sales for every quarter is forcasted with an increase of 10% and so accordingly reverse calculation is done to calculate sales for Q1, Q2 and Q3. As for Q4 sales of last year would calculated as (sales in Q1 of current quarter *100/110) which is 291*100/110 so sales for Q4 of last quarter of last year is $ 264.54 and accordingly sales of Q3 and Q4 for last year is calculated which is $ 240.49 and 218.63.

c Calculation of payment to supplier by Iron Man when there is 60 days credit period

Working for c -

Similar to explanation given in b calculation is done for c. Here the period of ccredit is 60 days. So as per the calculation basis given in b above calculation is done for Q4 and Q3 of last year quarter which 240.50 and $ 264.55 which gets paid in Q1 and Q2 in current year quarter.

Description Q1 Q2 Q3 Q4 Purchases (30% of the projected sales for next quarter) 291 279 309 339.90 Amount payable is immediate so it would be same as purchases amount 291 279 309 339.90

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