the lineberry golf cart company sold 7,400 golf carts this year at an average un

ID: 2669143 • Letter: T

Question

the lineberry golf cart company sold 7,400 golf carts this year at an average unit price of 3,000. fifty daysof sales remanied un collected in accounts recivable at the ebn of the year. the firm produced the carts at a 42% cost ratio (cogs/revenue) and had three months of inventory on hand at year end (3 1/2 of the years cogs) the golf bussiness is booming and mangement plans 10% incerease in unit sales despite 5% price increase the firm has programs in place to improve producton efficiency inventory mangement and the effectiveness of collection efforts. it is assumed that thease programs will decrease the cost ratio to 40% lower year end inventory to two months and lower year end recieivables to 40 days sales. compute lineberrys revenue cogs and gross margin as well as ending receivbles and inventory for this years and next years plan. calcute using 360 day year and assume sales are evenly distributed over the year.

Explanation / Answer

This year

Next year

Units

7400

7400 x 1.1= 8140

price

3000

3000 x1.05= 3150

revenue

22,200,00

25,641,00

Revenue x cost ratio= COGS

Cost ratio

.40

COGS

9,324,000

10,256,400

Revenue – COGS=GROSS MARGIN

GROSS MARGIN

12,876,000

15,384,600

(DAYS sales in A/R DIVIDED 360) REVENUE =A/R

A/R(50/360) X 22,200,000

3,083,333

2,849,000

INVENTORY

COGS (3/12) X 9324,000

2,331,000

2/12 X 10,256,400 =1709400