slove only 5 plz The selling price per unit is $40.00 December of the previous y

Question

slove only 5 plz

The selling price per unit is $40.00

December of the previous year 10,000

January                                                40,000

February                                  60,000

March                                      100,000

April                                        70,000

                                   

2. Prepare a purchases budget for January through March, and the first quarter in total. Assume that the company only sells one product that can be purchased at $15.00 per unit. The market for this product is very competitive and customers highly value service such as quality and on time delivery of the product. Also assume that currently it is company policy that ending inventory should equal 50% of next month’s projected sales.

3. Prepare a cash budget for January through March and for the first quarter in total. The company maintains a minimum cash balance of $50,000.00, and this was the balance in the cash account on January 1. Past experience shows that 30% of sales are collected in the month of the sale, and 70% in the month following the sale. Labor cost is $15 per unit. Other expenses include $17,000 per month for rent, $4,000 for advertising, and $6,000 per month for depreciation. All costs are paid in the current month except inventory purchases, which are paid in the month following purchase (i.e. January purchases are paid in February). On January 1st there was an outstanding accounts payable balance of $100,000. The company has an open line of credit with a bank and can borrow at an annual rate of 12%. For simplification assume that all loans are made at the beginning of the month and repayments are made at the end, and interest is only paid at the time when repayment is made. Additionally, all loans and repayments (not the interest portion) can only be made in increments of $1000 and the company would like to pay its debts, or a portion thereof, as soon as it has enough cash to do so.

4. Prepare the Budgeted Income Statement based on the information given above.

Label this budget scenario as A.,

5. Repeat steps 2-4 for budget scenarios B and C using the following Desired ending inventory assumptions:

Ending Inventory

B.

90%

C.

3%

Ending Inventory

B.

90%

C.

3%

Explanation / Answer

2 Purchase Budget At level 90% January February March Total Sales 40,000 60,000 100,000 200,000 Requirement 40,000 60,000 100,000 200,000 Add: Desired Ending Inventory 54000 90000 63000 63000 Total requirement 94,000 150,000 163,000 263,000 Less: Opening Inventory 36000 54000 90000 36000 Purchase requirement 58,000 96,000 73,000 227,000 Cost Per Unit 15 15 15 15 Total Purchase amount 870000 1440000 1095000 3405000 Payment for the Purchase 100,000 870000 1440000 2,410,000

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