eauty Spa & Co. manufactures a specialised luxury spa that is supplied to five-star hotels around the
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Question:
- eauty Spa & Co. manufactures a specialised luxury spa that is supplied to five-star hotels around the country. The owner provides you with the following information to prepare its 1st quarter budget: July, August, and September. Budgeted sales are as follows:
Month | Sales ($) | Units Sold |
May | 25,000 | 250 |
June | 28,000 | 280 |
July | 30,000 | 300 |
August | 40,000 | 400 |
September | 35,000 | 350 |
October | 37,000 | 370 |
Additional information:
i) Purchases are budgeted at $5.00 per unit and are paid for in full in the month after purchase.
ii) Closing inventory must equal 50% of the next month's sales.
iii) Sales (which are all on credit) are collected as follows: 60% in the month of sale; 30% in the month after the sale; 5% in the second month after the sale.
iv) The balance in the bank account as of 30 June is $10,000.
Required (show your workings for each question):
- Prepare a purchases budget (in units and $) for the 1st quarter. (Purchases are based on expected sales).
- Prepare the schedule of expected cash collections from Accounts Receivable for the months of July and August.
Related Book For
Contemporary business 2012 update
ISBN: 978-1118010303
14th edition
Authors: Louis E. Boone, ? David L. Kurtz
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