NIU Company\'s budgeted sales and direct materials purchases are as follows. Bud

Question

NIU Company's budgeted sales and direct materials purchases are as follows.

Budgeted Sales Budgeted D.M. Purchases
January $204,000 $30,600
February 224,400 35,700
March 275,400 41,820

NIU's sales are 40% cash and 60% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. NIU's purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month of purchase, and 60% in the month following purchase.

-Prepare a schedule of expected collections from customers for March.
-Prepare a schedule of expected payments for direct materials for March.

Explanation / Answer

collections from customers for March = 36%*60%*$204,000 + 60%*224,400*50% + 60%*275,400*10% + 40%*275,400= $238,068 expected payments for direct materials for March = 50%*35,700*60% + 50%*41,820 + 50%*41,820*40% = $39,984

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