Question

Mountain Mash produces ice cream for wholesale distribution to grocers, restaurants, and independent ice cream shops. March, April, May, June, and July are busy months for the company as its customers gear up for the spring and summer rush. Mountain Mash has projected the following level of sales (in gallons) for March through June:


The company has a set wholesale selling price of $3.50 per gallon. Mountain Mash’s customers purchase ice cream on credit, with the agreement that they must pay invoices within 30 days. Nonetheless, not all customers pay within that time frame. Mountain Mash’s credit manager has developed the following table to show the typical cash collection pattern:
70 percent of sales are collected in the month of sale
25 percent of sales are collected in the month following the month of sale
5 percent of sales are collected in the second month following the month of sale

Required
A. Prepare a sales budget for March, April, May, June, and July.
B. Prepare a cash receipts budget for May, June, and July. Be sure to remember the cash collections from months prior to May.
C. If sales and cash collections are exactly as the company estimates, how much will customers owe Mountain Mash as of the end ofJuly?


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  • CreatedMarch 11, 2015
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