The Strand Company has estimated that sales for next quarter would be 30,000 uni

Question

The Strand Company has estimated that sales for next quarter would be 30,000 units. The company has a beginning finished goods inventory of 2,000 units and wishes to have finished goods inventory of 5,000 units at the end of the quarter. How many units must the company produce in order to have its desired ending inventory?

Part B. Strand Company has predicted sales for the first three quarters of 2016. The predictions are: first quarter, $250,000; second quarter, $200,000; third quarter, $300,000. 80% of sales are collected in the quarter of sale, and 20% of sales are collected in the following quarter. The company's expected cash receipts for the third quarter of 2016 are _____:

Explanation / Answer

Answer:

Total units to be produced = Estimated Sales + Desired ending inventory – beginning inventory

Total units to be produced = 30000 + 5000 – 2000

Total units to be produced = 33000 units

B.

Cash receipt in any quarter = 80% of sales of existing quarter + 20% of the sales of just preceding quarter

Thus,

Cash receipt in third quarter of 2016 = 80% of sales of third quarter + 20% of sales of second quarter

Cash receipt in third quarter of 2016 = 80%*300000 + 20%*200000

Cash receipt in third quarter of 2016 = $280000

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