The following information pertains to the operating budget for Opa Locka Stuff C
ID: 2464820 • Letter: T
Question
The following information pertains to the operating budget for Opa Locka Stuff Corporation.
Sales for August were $175,000
Sales for September were $185,000
Budgeted sales for October is $182,000 and for November is $226,000.
Cash sales are 10% of total sales
Collections for sales on account are 50% in the month of sale, 40% the next month, 8% in the third month.
Gross margin is 40% of sales.
Purchases are paid 30% in the month of purchase and 70% in the next month. Merchandise is bought and sold in the same month. There is no beginning or ending inventory.
Operating, general & administrative costs are $62,000 each month, $4,000 of which is depreciation expense.
A downpayment on new equipment for January delivery is due on October 5th in the amount of $14,000.
Opa Locka policy is to end each month with $20,000 cash on hand.
Beginning cash balance on October 1 is $20,000.
The outstanding loan balance on October 1 is $30,000.
What are . . .
Collections from sales for October _____________ November _____________
Disbursements for purchases October _____________ November _____________
Cash balance at the end of (before borrowing/repaying) October _____________ November _____________
Loan balance at the end of October _____________ November _____________
Operating income for October _____________ November _____________
Cash flow for October _____________ November _____________
Uncollected balance from sales at the end of November _____________
Unpaid balance from purchases at the end of November _____________
Explanation / Answer
Calculation of collections from sales for October and November:
Details
Aug
Sep
Oct
Nov
Total sales
$ 175,000
$ 185,000
$ 182,000
$ 226,000
Credit sales
$ 157,500
$ 166,500
$ 163,800
$ 203,400
sales on account (50%)
$ 78,750
$ 83,250
$ 81,900
$ 101,700
sales on account (40%)
$ 63,000
$ 66,600
$ 65,520
sales on account (8%)
$ 12,600
$ 13,320
Total
$ 78,750
$ 146,250
$ 161,100
$ 180,540
Calculation of Disbursements for purchases October and November:
Details
Aug
Sep
Oct
Nov
Total sales
$ 175,000
$ 185,000
$ 182,000
$ 226,000
Purchases @60% on sales
$ 105,000
$ 111,000
$ 109,200
$ 135,600
Cash paid @30%
$ 31,500
$ 33,300
$ 32,760
$ 40,680
Cash paid @70%
$ 73,500
$ 77,700
$ 76,440
Total
$ 31,500
$ 106,800
$ 110,460
$ 117,120
Calculation of Cash balance at the end of (before borrowing/repaying) October and November:
And Loan balance at the end of October and November:
Details
Oct
Nov
Cash opening balance
$ 20,000
$ 20,000
Receipts:
Cash sales
$ 18,200
$ 22,600
Credit sales
$ 161,100
$ 180,540
Total collections
$ 199,300
$ 223,140
Payments:
Purchases
$ 110,460
$ 117,120
Administrative exp
$ 58,000
$ 58,000
Cash on hand
$ 20,000
$ 20,000
Loan
$ 30,000
$ 30,000
Total payments
$ 188,460
$ 195,120
Details
Aug
Sep
Oct
Nov
Total sales
$ 175,000
$ 185,000
$ 182,000
$ 226,000
Credit sales
$ 157,500
$ 166,500
$ 163,800
$ 203,400
sales on account (50%)
$ 78,750
$ 83,250
$ 81,900
$ 101,700
sales on account (40%)
$ 63,000
$ 66,600
$ 65,520
sales on account (8%)
$ 12,600
$ 13,320
Total
$ 78,750
$ 146,250
$ 161,100
$ 180,540
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