Kevin Montgomery Retail seeks your assistance to develop cash and other budget information for May,June,and July.At April 30,the company had cash of $5,500,accounts receivable of $437,000,inventories of $309,400,and accounts payable of $133,055.The budget is to be based on the following assumptions: SALES:
Each month's sales are billed on the last day of the month.Customers are allowed a 3% discount if payment is made within 10 days after the billing date.Receivables are recorded in the accounts at their gross amounts (not net of discounts).55% of the billings are collected within the discount period;30% are collected by the end of the month;9% are collected by the end of the second month;and 6% turn out to be uncollectible.PURCHASES:
60% of all purchases of merchandise and the marketing,general,and administrative expenses are paid in the month purchased and the remainder in the following month.The number of units in each month's ending inventory is equal to 125% of the next month's units of sales.The cost of each unit of inventory is $30.Marketing,general,and administrative expenses,of which $3,000 is depreciation,are equal to 15% of the current month's sales.Actual and projected sales are as shown below:

$$\begin{array} { | l | c | c | }
\hline & \text { Dollars } & \text { Unis } \
\hline \text { March } & \$ 472,000 & 11,800 \
\hline \text { April } & \$ 484,000 & 12,100 \
\hline \text { May } & \$ 476,000 & 11,900 \
\hline \text { June } & \$ 466,000 & 11,400 \
\hline \text { Juby } & \$ 480,000 & 12,000 \
\hline \text { August } & \$ 480,000 & 12,200 \
\hline
\end{array}$$What are the budgeted number of inventory units that need to be purchased in July?

Question

Kevin Montgomery Retail seeks your assistance to develop cash and other budget information for May,June,and July.At April 30,the company had cash of $5,500,accounts receivable of $437,000,inventories of $309,400,and accounts payable of $133,055.The budget is to be based on the following assumptions: SALES:
Each month's sales are billed on the last day of the month.Customers are allowed a 3% discount if payment is made within 10 days after the billing date.Receivables are recorded in the accounts at their gross amounts (not net of discounts).55% of the billings are collected within the discount period;30% are collected by the end of the month;9% are collected by the end of the second month;and 6% turn out to be uncollectible.PURCHASES:
60% of all purchases of merchandise and the marketing,general,and administrative expenses are paid in the month purchased and the remainder in the following month.The number of units in each month's ending inventory is equal to 125% of the next month's units of sales.The cost of each unit of inventory is $30.Marketing,general,and administrative expenses,of which $3,000 is depreciation,are equal to 15% of the current month's sales.Actual and projected sales are as shown below:

$$\begin{array} { | l | c | c | } 
\hline & \text { Dollars } & \text { Unis } \
\hline \text { March } & \$ 472,000 & 11,800 \
\hline \text { April } & \$ 484,000 & 12,100 \
\hline \text { May } & \$ 476,000 & 11,900 \
\hline \text { June } & \$ 466,000 & 11,400 \
\hline \text { Juby } & \$ 480,000 & 12,000 \
\hline \text { August } & \$ 480,000 & 12,200 \
\hline
\end{array}$$What are the budgeted number of inventory units that need to be purchased in July?

Quizplus · Accepted Answer

The budgeted number of inventory units that need to be purchased in July is calculated by ensuring the ending inventory for July is 125% of August's sales units. August's sales units are 12,200, so July's ending inventory should be 12,200 * 1.25 = 15,250 units. July's sales are 12,000 units, so the beginning inventory for July should be 15,000 units (125% of July's sales). Therefore, the units to be purchased in July are 15,250 - 15,000 = 12,250 units.

Kevin Montgomery Retail Seeks Your Assistance to Develop Cash and Other