Grohl Products has projected the following sales for the coming year: Sales in t

Question

Grohl Products has projected the following sales for the coming year: Sales in the year following this one are projected to be 25 percent greater in each quarter. Requirement 1: Calculate payments to suppliers assuming that the company places orders during each quarter equal to 35 percent of projected sales for the next quarter. Assume that the company pays immediately. What is the payables period in this case? Payables period What are the payments to suppliers each quarter? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16)): Requirement 2: Calculate payments to suppliers assuming that the company places orders during each quarter equal to 35 percent of projected sales for the next quarter. Assume a 90-day payables period. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Requirement 3: Calculate payments to suppliers assuming that the company places orders during each quarter equal to 35 percent of projected sales for the next quarter. Assume a 60-day payables period. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

Explanation / Answer

Answer:-

Q1 Q2 Q3 Q4 Q5
sales 540 630 780 720 125% x 540 = 675

Explanation:(1):

The payables period is zero since the company pays immediately. The payment in each period is 35 percent of next period’s sales, so:

Quarterly payments = (0.35)(next period sales).

Q1 =.35 *630=220.5

Q2=.35*780=273

Q3=.35*720=252

Q4=.35*675=236.25

Explanation (2):

Since the payables period is 90 days, the payment in each period is 35 percent of the current period sales, so:

Quarterly payments = (0.35)(current sales).

Q1 =.35 *540=189

Q2=.35*630=220.5

Q3=.35*780=273

Q4=.35*720=252

Explanation (3):

Since the payables period is 60 days, the payment in each period is 2/3 of last quarter’s orders, plus 1/3 of this quarter’s orders, or :

Quarterly payments = 2/3(0.35) (current sales) + 1/3(0.35) (next period sales).

Q1 =199.53

Q2=238.02

Q3=265.98

Q4=246.74

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