Hinrich Entertainment distributes a DVD which sell for $12 per unit. Hinrich pays $7 per unit to buy product. Selling costs of $1 per unit is incurred to deliver product to the customer. This is paid in cash when product is sold. Additionally, Hinrich has $50,000 per month in fixed and selling and administrative expenses (counting $3,000 in depreciation), which are paid half in month incurred and half in next month. It is Hinrich policy to maintain an inventory at end of each month equal to 20 percent of the next months projected cost of sales. Hinrich makes 30 percent of sales in cash, and rest are on credit. Credit sales are collected in the month after the sale. Budgeted monthly sales in units and dollars for the first three months of 2008 are as given:
January = 20,000 units
February= 22,000 units
March= 26,000 units
April=28,000
May=40,000
Answer the subsequent questions:
1. Find what amount of purchases of inventory will be required in February?
2. Find what will total collections be in February?
3. Evaluate what will Accounts Receivable be at end of February?
4. Find what will cash payment for administrative and selling expenses be in February including fixed and variable cash expenses?