Problem - Budgeted Purchases and Cash Flows
Delhi, Inc., seeks your assistance in developing cash and other budget information for August, September, and October. At July 31, the company had cash of $22,000, Accounts receivable of $1,748,000, inventories of $1,237,600, and accounts payable of $531,220. The budget is to be based of the following assumptions.
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) the billings are collected as follows: 60% within the discount period, 25% by the end of the month, and 9% by the end of the following month. 6% is uncollectible.
Purchase data are as follows.
Of all purchases of merchandise and selling, general, and administrative expenses, 54% is paid in the month purchased and the remainder in the following month.
The number of units in each month's ending inventory equals 130% of the next month's units of sales.
The cost of each unit of inventory is $20.
Selling, general, and administrative expenses, of which $8000 is depreciation, equal 15% of current months sales.
Actual and projected sales follow:
Dollars Units
June $1,416,000 47200
July $1,452,000 48400
August $1,428,000 47600
September $1,368,000 45600
October $1,440,000 48000
November $1,464,000 48800
Required - Compute the following:
A. Budgeted purchases in dollars for August
B. Budgeted purchases in dollars for September
C. Budgeted cash collections during August
D. Budgeted cash disbursements during September
E. The budgeted number of units of inventory to be purchased in October.