The Lineberry Golf Cart Co. sold 7,400 carts this year at an average unit price

ID: 2758174 • Letter: T

Question

The Lineberry Golf Cart Co. sold 7,400 carts this year at an average unit price of $3,000. The firm produced the carts at a 42% cost ratio, which is calculated as cost of goods sold (COGS) divided by revenue. At year end, 45 days of sales remained uncollected in accounts receivable, and three months of inventory was on hand (a month of inventory is 1/12 of the year's COGS). The golf cart business is booming and management plans a 12% increase in unit sales despite a 4% price increase. The firm has programs in place to improve production efficiency, inventory management, and the effectiveness of collection 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. Use the format below to develop this year's and next year's revenue and cost of goods sold (COGS) and year ending balance for accounts receivable and inventory. Calculate using a 360-day year and assume sales are evenly distributed over the year. Round your answers for cost ratio in decimals to two decimal places and all other answers to the nearest whole number.

Explanation / Answer

Hi there,

COGS( Rev*Cost ratio)

=22200000*0.42

=9324000

=27705600*0.42

=11636352

=45/360*22200000

=2775000

=40/360*27705600

=3078400

=(3/12)*9324000

=2331000

=(2/12)*11636352

=1939392

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This year Next year Units 7400 7400*1.12 = 8880 Price 3000 3000*1.04 = 3120 Revenue = 22200000 =27705600