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Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins
Edition 7ISBN: 978-0077733773Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins
Edition 7ISBN: 978-0077733773 Exercise 44
Budgeted Cash Receipts and Cash Payments Timpco, a retailer, makes both cash and credit sales (i.e., sales on open account). Information regarding budgeted sales for the last quarter of the year is as follows:
Past experience shows that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale; the remaining 40% are collected in the month following the month of sale. Customers are granted a 1.5% discount for payment within 10 days of billing. Approximately 75% of collectible credit sales take advantage of the cash discount.
Inventory purchases each month are 100% of the cost of the following month's projected sales. (The gross profit rate for Timpco is approximately 30%.) All merchandise purchases are made on credit, with 25% paid in the month of purchase and the remainder paid in the following month. No cash discounts for early payment are in effect.
Required
1. Calculate the budgeted total cash receipts for November and December.
2. Calculate budgeted cash payments for November and December (budgeted total sales for January of the coming year = $200,000).
Past experience shows that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale; the remaining 40% are collected in the month following the month of sale. Customers are granted a 1.5% discount for payment within 10 days of billing. Approximately 75% of collectible credit sales take advantage of the cash discount.
Inventory purchases each month are 100% of the cost of the following month's projected sales. (The gross profit rate for Timpco is approximately 30%.) All merchandise purchases are made on credit, with 25% paid in the month of purchase and the remainder paid in the following month. No cash discounts for early payment are in effect.
Required
1. Calculate the budgeted total cash receipts for November and December.
2. Calculate budgeted cash payments for November and December (budgeted total sales for January of the coming year = $200,000).
Explanation
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Cash receipts budget: Cash receipts budg...
Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins
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