Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12 per unit, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of Product B is 3,000 units.
-Gilbert's expects its September sales to be 20% higher than its August sales of $150,000. Manufacturing costs were $100,000 in August and are expected to be $120,000 in September. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Payments of manufacturing costs are as follows: 25% in the month of production and 75% in the following month. The beginning cash balance on September 1 is $7,500. The ending balance on September 30 would be

Question

Quizplus · Accepted Answer

The correct answer is A because the ending cash balance on September 30 would be $61,500. This is calculated as follows:Beginning cash balance: $7,500Add: Cash receipts from August sales: $150,000 x 30% = $45,000Add: Cash receipts from September sales: $150,000 x 120% x 30% = $54,000Less: Payments for August manufacturing costs: $100,000 x 25% = $25,000Less: Payments for September manufacturing costs: $120,000 x 25% = $30,000Ending cash balance: $61,500

Next Year's Sales Forecast Shows That 20,000 Units of Product