Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon...

Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida.

a. If Neon Light Company has $2.55 million per day in collections and $1.11 million per day in disbursements, how many dollars will the cash management system free up? (Enter your answer in dollars not in millions (e.g., $1,234,567).)

b. If Neon Light Company can earn 7 percent per annum on freed-up funds, how much will the income be? (Enter your answer in dollars not in millions (e.g., $1,234,567).)

c. If the total cost of the new system is $430,000, should it be implemented?

No
Yes

Expert Solution

Answer : (a.) Calculation of dollars that cash management system will free up :

Cash that can be freed from Collections = Per Day Collection * 2 days speed up

= 2.55 million * 2

= 5.1 million

Cash that can be freed from Disbursements = Per day Disbursement * 0.5 days

= 1.11 million * 0.5

= 0.555 million

The Total Cash Freed = 5,100,000 + 555,000

= 5,655,000

(b.) Income on Freed Funds = 5,655,000 * 7%

= 395850

(c.) No it should not be implemented as Total Cost is more than Income on freed amount.

jeff jeffy answered 2 years ago

Hopkins Lighting Company is a wholesale lighting company that purchases lamps and resells them to retail...

Hopkins Lighting Company is a wholesale lighting company that purchases lamps and resells them to retail customers. Hopkins is beginning operations on October 1, 2019. Hopkins Lighting Company stocks three inventory items: desk lamps, table lamps, and floor lamps. Hopkins uses a perpetual inventory system. All expenses associated with the office are Administrative Expenses and all expenses associated with the wharehouse are selling expenses. Hopkinss has hired you to assist them regarding what inventory flow method to adopt. Hopkinss not...

Dave's Lighting Inc. produces lamps for the construction industry. During the year, the company incurred the...

Dave's Lighting Inc. produces lamps for the construction industry. During the year, the company incurred the following costs: Factory Rent $ 80,000 Direct labor used 425,000 Factory utilities 50,000 Direct materials purchases 600,000 Indirect materials 150,000 Indirect labor 90,000 Inventories for the year were: January 1 December 31 Direct materials $ 100,000 $ 75,000 Work in process 20,000 10,000 Finished goods 250,000 215,000 Required: Prepare a statement of Cost of Goods Sold.

The Bright Idea Lighting Company manufacturers light bulbs. They claim that over half of their light...

The Bright Idea Lighting Company manufacturers light bulbs. They claim that over half of their light bulbs last for at least 400 hours. A random sample of 21 light bulbs produced the following lifetimes (in hours): [190, 225, 265, 288, 297, 303, 314, 327, 335, 368, 387, 392, 401, 411, 426, 435, 440, 441, 448, 452, 463]. Let θ0.5 denote the true median lifetime of Bright Idea light bulbs. Consider testing the hypotheses H0 : θ0.5 = 400 vs. Ha...

Thornton Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory...

Thornton Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Thornton’s policy is to maintain an ending inventory balance equal to 15 percent of the following month’s cost of goods sold. April’s budgeted cost of goods sold is $84,000 Required Complete the inventory purchases budget by filling in the missing amounts. Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement. Determine...

Rundle Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory...

Rundle Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Rundle’s policy is to maintain an ending inventory balance equal to 15 percent of the following month’s cost of goods sold. April’s budgeted cost of goods sold is $83,000. Required Complete the inventory purchases budget by filling in the missing amounts. Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement. Determine...

Perez Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory...

Perez Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Perez’s policy is to maintain an ending inventory balance equal to 20 percent of the following month’s cost of goods sold. April’s budgeted cost of goods sold is $78,000. Required Complete the inventory purchases budget by filling in the missing amounts. Inventory Purchases Budget January February March Budgeted cost of goods sold $53,000 $57,000 $63,000 Plus: Desired ending inventory 11,400 Inventory needed...

A company wants to ship products from Jefferson City and Omaha to Des Moines, Kansas City...

A company wants to ship products from Jefferson City and Omaha to Des Moines, Kansas City or St. Louis. In the table below you see shipping costs and supply and demand amounts. How do you set this up in Excel through the Solver? Please show the steps. Thanks! From to Des Moines Kansas City St. Louis Supply Jefferson City 14 9 7 30 Omaha 8 10 5 20 Demand 25 15 10

Campbell Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget.

Campbell Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Campbell's policy is to maintain an ending inventory balance equal to 10 percent of the following month's cost of goods sold. April's budgeted cost of goods sold is $79,000. Required a. Complete the inventory purchases budget by filling in the missing amounts. b. Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement. c. Determine the...

Adams Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget.

Adams Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Adams's policy is to maintain an ending inventory balance equal to 10 percent of the following month's cost of goods sold. April's budgeted cost of goods sold is $83,000. Required a. Complete the inventory purchases budget by filling in the missing amounts. b. Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement. c. Determine...

Baird Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget.

Baird Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Baird's policy is to maintain an ending inventory balance equal to 10 percent of the following month's cost of goods sold. April's budgeted cost of goods sold is $79,000. Required a. Complete the inventory purchases budget by filling in the missing amounts. b. Determine the amount of cost of goods sold the company will report on its first quarter pro forma income statement. c. Determine the...

Question