Problem:
Thorton Company estimates its sales at 80,000 units in the first quarter and that sales will increase by 8,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale.
1. Cash collections for the third quarter are budgeted at
a. $1,356,000.
b. $1,968,000.
c. $2,364,000.
d. $2,736,000.
2. Production in units for the third quarter should be budgeted at
a. 98,000.
b. 92,000.
c. 122,000.
d. 96,000.