The Lineberry Golf Cart Co sold 7,400 cam this year at an average unit price of
ID: 2422391 • Letter: T
Question
The Lineberry Golf Cart Co sold 7,400 cam this year at an average unit price of $3,000. Fifty days of sales remained uncollected in accounts receivable at the end of the year. The firm produced the carts at a 42% cost ratio (CCXiS/Revenue) and had three- months of inventory on hand at year end (3/12 of the year's COGS). The golf business is booming and management plans a 10% increase in unit sales despite a 5% price increase. The firm has programs in place to improve production efficiency, inventory management, and the effectiveness of collections efforts. It is assumed that these programs will decrease the cost ratio to 40%, lower year-end inventory to two months, and lower year-end receivables to 40 days of sales. Compute Lingberry's revenue, COGS (cost of goods sold), and gross margin as well as ending re-devalues and inventory for this year's and next year's plan. Calculate using a 360-day year and assume sales are evenly distributed over the year.Explanation / Answer
This Year:
Total Revenue of Lineberry Cart Company is US$ 222,00,000 i.e. US$22.2 Million (This has been derived by multiplying 7400 carts with average price of US$3,000)
COGS of Lineberry Cart Company is US$ 9,324,000 i.e. US$ 9.32 Million (This has been derived by pultiplying average COGS Ratio of 42% with Total Revenue derived above)
Gross Margin is US$ 12876000 i.e. US$ 12.88 Million (This has been derived by deducting COGS from Total Revenue)
Year End Receivables is US$ 3,083,333 i.e. US$3.08 Million. This is equivalent to 50 days of average revenue as calculated above.
Year End Inventory is US$ 2,331,000 i.e. US$ 2.33 Million.This has been derived by deviding COGS calculated above by 12 months and the multiplying it by 3.
Next Year:
Avarage Price will go up by 5% i.e. from an existing level of US$ 3,000 it will be US $ 3,150
Avarage increase in sale 10% i.e. from existing level of 7400 to it will be 8140 Units
Total Revenue for next year will be US$ 25,641,000 i.e. US$ 25.64 Million
Total COGS for Next year will be US$ 10,256,400 i.e. US$ 10.26 Million. This is 40% of total revenue.
Total Gross Margin for next year will be US$ 15,384,600 i.e. US $ 15.38 Million
Year End Receivables is US$ 2,849,000 i.e. US$2.85 Million. This is equivalent to 40 days of average revenue as calculated above.
Year End Inventory is US$ 1,709,400 i.e. US$ 1.71 Million.This has been derived by deviding COGS calculated above by 12 months and the multiplying it by 2.
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