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Question:

The Foreign Products Company (FPC) has been in operation for the past 3 years. FPC sources the best unique products it can find from other countries in the region that are not available locally and then sells them to its customers around Australia. FPC's customers consist of large supermarket chains (e.g., Coles, Woolies) and small independent grocers. FPC is organised into teams: a Sales Team who is responsible for securing sales to its customers; a Purchasing Team who is responsible for sourcing the products from its regional suppliers; and a Financing Team which makes sure that FPC has sufficient funds to conduct its operations. Selected budget data regarding FPC's activities for the upcoming quarter are as follows: Sales are budgeted at $1,000,000 in January 2022, $1,200,000 in February 2022, $750,000 in March 2022. This is based on information submitted by the Sales Team which is then communicated to the rest of the organisation. Collections from customers are expected to be 75% in the month of sale and 10% in the month following the sale. The remaining 15% is uncollectable and is written off as bad debt. The company is trying to reduce the amount that is uncollectable. The cost of goods sold is expected to be 72% of sales. This includes the cost of surface (shipping) freight which is significant. The Purchasing Team plans to purchase all the goods that are expected to be sold by the Sales Team to customers in the month prior to the month of sale to allow sufficient time for goods to be received and then delivered to the customers. Payment for the goods purchased is made in the month following the purchase. Other budgeted monthly expenses in January, February and March 2022 expected to be $250,000 - all of which to be paid in the same month. The Financing Team does not plan to undertake any financing and investing activities in the first quarter of 2022. Cash balance as of 1 January, 2022 is budgeted to be $275,000. Assume that it is currently 15 January 2022. At this time, the master budget has already been drawn up using the information provided above (and other information) and is currently in use at FPC. One of FPC's major and most profitable customers (XCUST) informs the Sales Team that it will no longer be purchasing goods from FPC from February 2022 onwards. What are TWO actions that the Sales Team should take once it finds out about XCUST's decision? Explain. Calculations are not necessary. The Foreign Products Company (FPC) has been in operation for the past 3 years. FPC sources the best unique products it can find from other countries in the region that are not available locally and then sells them to its customers around Australia. FPC's customers consist of large supermarket chains (e.g., Coles, Woolies) and small independent grocers. FPC is organised into teams: a Sales Team who is responsible for securing sales to its customers; a Purchasing Team who is responsible for sourcing the products from its regional suppliers; and a Financing Team which makes sure that FPC has sufficient funds to conduct its operations. Selected budget data regarding FPC's activities for the upcoming quarter are as follows: Sales are budgeted at $1,000,000 in January 2022, $1,200,000 in February 2022, $750,000 in March 2022. This is based on information submitted by the Sales Team which is then communicated to the rest of the organisation. Collections from customers are expected to be 75% in the month of sale and 10% in the month following the sale. The remaining 15% is uncollectable and is written off as bad debt. The company is trying to reduce the amount that is uncollectable. The cost of goods sold is expected to be 72% of sales. This includes the cost of surface (shipping) freight which is significant. The Purchasing Team plans to purchase all the goods that are expected to be sold by the Sales Team to customers in the month prior to the month of sale to allow sufficient time for goods to be received and then delivered to the customers. Payment for the goods purchased is made in the month following the purchase. Other budgeted monthly expenses in January, February and March 2022 expected to be $250,000 - all of which to be paid in the same month. The Financing Team does not plan to undertake any financing and investing activities in the first quarter of 2022. Cash balance as of 1 January, 2022 is budgeted to be $275,000. Assume that it is currently 15 January 2022. At this time, the master budget has already been drawn up using the information provided above (and other information) and is currently in use at FPC. One of FPC's major and most profitable customers (XCUST) informs the Sales Team that it will no longer be purchasing goods from FPC from February 2022 onwards. What are TWO actions that the Sales Team should take once it finds out about XCUST's decision? Explain. Calculations are not necessary