Montero Corporation, a merchandising company, has provided the following budget data: Purchases Sales January $42,000
Question:
Montero Corporation, a merchandising company, has provided the following budget data:
Purchases | Sales | |
January | $42,000 | $72,000 |
February | 48,000 | 66,000 |
March | 36,000 | 60,000 |
April | 54,000 | 78,000 |
May | 60,000 | 66,000 |
Collections from customers are normally 70% in the month of sale, 20% in the month following the sale, and 9% in the second month following the sale. The balance is expected to be uncollectible. Montero pays for purchases in the month following the purchase. Cash disbursements for expenses other than merchandise purchases are expected to be $14,400 for May. Montero's cash balance on May 1 was $22,000.
Required:
a) Compute the expected cash collections during May.
b) Compute the expected cash balance on May 31.
QUESTION 2
A sales budget is given below for one of the products manufactured by the OMI Co.:
January | 25,000 units |
February | 40,000 units |
March | 65,000 units |
April | 45,000 units |
May | 35,000 units |
June | 30,000 units |
The inventory of finished goods at the end of each month must equal 20% of the next month's sales. However, on December 31, the finished goods inventory totalled only 4,000 units.
Each unit of product requires three kilograms of specialized material. Since the production of this specialized material by OMI's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on January 1 of the current year.
Required
Prepare a budget showing the quantity of material to be
purchased each month for January, February, and March, and in total for the quarter.
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer