Problem - Kalamazoo-Rama typically makes 80 percent of its sales on credit. The company bills sales twice monthly, on the 10th of the month for last half of the prior month's sales and on the 20th of the month for the first half of the current month's sales. All sales are made with terms of 2/10,n/30.Based on past experience, accounts receivable are collected as follows:
Within the discount period 80%
On the 30th day 18%
Uncollectible 2%
Sales for May 2009 were $600,000, and projected sales for next four months are
June %800,000
July 700,000
August 800,000
September 600,000
Kalamazoo-Rama's average profit margin on its products is 30 percent of selling price.
Kalamazoo-Rama purchases merchandise to meet the current month's sales demand and to maintain a desired monthly ending inventory of 25 percent of the next month's sales. All purchases are on account with terms of n/30. The company pays for one-half of a month's purchases in the month of purchase and the other half in the month following the purchase. All sales and purchases occur evenly thrughout the month.
a) How much cash can Kalamazoo-rama plan to collect from credit sales during july 2009?
b) How much cash can Kalamazoo-Rama plan to collect in September 2009 from sales made in August?
c) What will be the budgeted doller value of Kalamazoo-Rama's inventory on August 31, 2009?
d) How much merchandise should Kalamazoo-Rama plan to purchase during June 2009?
e) What are Kalamazoo-Rama's budgeted cash payments for merchandise during August 2009?