Budgeted sales in units for Company A is given below: The company is now in the

Question

Budgeted sales in units for Company A is given below: The company is now in the process of preparing a production budget for the third quarter of the year (July. August, and September). Past experience has shown that end-of-month finished goods inventories must equal 40% of the next month's sales. Units to be produced in September are: 60.000 32.000 55,000 none of the above Company B has the following data: All merchandise is marked up to sell at its invoice cost plus 30%. Desired ending inventory levels are 25% of next month's sales at cost. What is the desired ending inventory value at February 28? $15.840 $27,692 $17,280 $23,077 Company has the following sales budget: Collection of credit sales are 70% in the month of sale, 20% in the month following sale, and 10% two months following sale. No uncollectible accounts are expected. What is the expected balance of Accounts Receivable at October 31 ? $54.200 $77.000 $124,500 $153,300

Explanation / Answer

Ans 1 Production Budget July August September Total Oct Sales in units 20000 50000 75000 145000 25000 Closing Inventory 40% of next month Sales 20000 30000 10000 10000 Total Finised Googd 40000 80000 85000 155000 Less: Beginning Inventory 8000 20000 30000 8000 Units to be produced 32000 60000 55000 147000 Ans C 55000 units in september Note opening Inventory is 20000*40%=8000 Ans 2 Production Budget Jan Feb March Total April sales 108000 132000 144000 384000 120000 Cost of Good Sold Sales/130*100 83077 101538 110769 295385 92308 Closing Inventory 25% of next month COGS 25385 27692 23077 23077 Total Finised Googd 108462 129231 133846 318462 Less: Beginning Inventory 20769 25385 27692 20769 Units to be produced 87692 103846 106153.8462 297692 Ans B Ending Inventory of Feb= $27692 Note opening Inventory is 83077*25%=20769 Ans 3 SCHEDULE OF EXPECTED CASH COLLECTIONS:                                                                                     Oct For sept Sales (200000*20%) 40000 Cash Sales 125000 For Oct Sales (190000*70%) 133000 Total cash collections                                                                                     298000 Accounts Receivable as on 31 Oct For Sep Sales (200000*10%) 20000 For Oct Sales (190000*30%) 57000 Accounts Receivable as on 31 Oct 77000 Ans B

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