Maxim Fasteners distributes giant binder clips that sell for $3 each.Maxim pays $1.20 each to buy the clips.The company has $4,000 per month in fixed costs.Policies and other information follow:
-Inventory is maintained at the end of each month equal to 10% of the next month's projected sales in units.
-Purchases are paid 40% in the month acquired and the balance in the month after.
-All sales are on credit, and 30% are collect in the month of sale and 70% in the month after sale.
-Budgeted monthly sales in units for the first five months of 2017 are as follows:
$$\begin{array} { l l l }
\text { - January } & 6,000 \text { units } \
\text { - February } & 5,000 \text { units } \
\text { - March } & 7,000 \text { units } \
\text { - April } & 9,000 \text { units } \
\text { - May } & 8,000 \text { units }
\end{array}$$
Variable selling and administrative costs are $0.50 per clip and are paid in the month of incurred.
What amount will be reported for budgeted Accounts Receivable at the end of April?

Question

Maxim Fasteners distributes giant binder clips that sell for $3 each.Maxim pays $1.20 each to buy the clips.The company has $4,000 per month in fixed costs.Policies and other information follow:
-Inventory is maintained at the end of each month equal to 10% of the next month's projected sales in units.
-Purchases are paid 40% in the month acquired and the balance in the month after.
-All sales are on credit, and 30% are collect in the month of sale and 70% in the month after sale.
-Budgeted monthly sales in units for the first five months of 2017 are as follows:
$$\begin{array} { l l l } 
\text { - January } & 6,000 \text { units } \
\text { - February } & 5,000 \text { units } \
\text { - March } & 7,000 \text { units } \
\text { - April } & 9,000 \text { units } \
\text { - May } & 8,000 \text { units }
\end{array}$$
Variable selling and administrative costs are $0.50 per clip and are paid in the month of incurred.
What amount will be reported for budgeted Accounts Receivable at the end of April?

Quizplus · Accepted Answer

To calculate the budgeted Accounts Receivable at the end of April, we need to consider the sales made in April and March, as 30% of sales are collected in the month of sale and 70% in the month after. For April (9,000 units at $3 each):- 30% collected in April: 9,000 units * $3 * 30% = $8,100 (not relevant for end of April AR)- 70% collected in May: 9,000 units * $3 * 70% = $18,900For March (7,000 units at $3 each), 70% collected in April:- 7,000 units * $3 * 70% = $14,700Therefore, the total Accounts Receivable at the end of April is the amount from March sales collected in April ($14,700) plus the amount from April sales to be collected in May ($18,900), which equals $33,600. However, this option is not provided, indicating a misunderstanding in the calculation process. The correct approach focuses solely on the sales not yet collected by the end of April, which are the April sales to be collected in May:- April sales to be collected in May: $18,900Thus, the correct answer, based on the provided options and the correct interpretation of the question, is $18,900, which corresponds to the sales of April that are yet to be collected by the end of April.

Maxim Fasteners Distributes Giant Binder Clips That Sell for $3