The following information was taken from the Pillows Unlimited sales budget, found in Summary Problem 1: The
Question:
The following information was taken from the Pillows Unlimited sales budget, found in Summary Problem 1:
The company’s collection history indicates that 75% of credit sales is collected in the month after the sale, 15% is collected two months after the sale, 8% is collected three months after the sale, and the remaining 2% is never collected.
Assume the following additional information was gathered about the types of sales made in the fourth quarter (October through December) of the previous year:
The following information was taken from the Pillows Unlimited direct materials budget, found in Summary Problem 1:
Assume that the total cost of direct materials purchases in December was \($725,000\). The company pays 40% of its direct materials purchases in the month of purchase and pays the remaining 60% in the month after purchase.
Requirements:
1. Prepare the cash collections budget for January, February, and March as well as a summary for the first quarter.
2. Prepare the cash payments budget for direct materials purchases for the months of January, February, and March as well as a summary for the quarter.
Data From Summary Problem 1:-
Pillows Unlimited makes decorative throw pillows for home use. The company sells the pillows to home décor retailers for \($14\) per pillow. Each pillow requires 1.25 yards of fabric, which the company obtains at a cost of \($6\) per yard. The company would like to maintain an ending stock of fabric equal to 10% of the next month’s production requirements. The company would also like to maintain an ending stock of finished pillows equal to 20% of the next month’s sales.
Sales (in units) are projected to be as follows for the first three months of the year:
Step by Step Answer:
