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In a given quarter, a company buys inventories from suppliers in an amount equal to 30%...

In a given quarter, a company buys inventories from suppliers in an amount equal to 30% of the following quarter's forecasted sales. Sales of the first quarter are projected to be $39,750. The company has a payables period of 120 days. Sales of the second quarter are projected to increase at 30.60% from the first, while sales of the third quarter are projected to increase at 10.80% from the second. Assuming quarter of 90 days, what is total cash payment made in the third quarter for inventory purchases?

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Expert Solution

Computation of second quarter inventory purchases, this will be paid third quarter:

First Quarter sales                          = $ 39,750.00

Second quarter sales                      = $ 39,750.00 * 130.60% = $51,913.50

Third Quarter sales                          = $51,913.50 * 110.80%  = $57,520.16

Therefore, Second quarter inventory     = Third quarter sales * 30%

                                                               = $57,520.16 * 30%

                                               = $17,256.05

So, $17,256.05 is the cash payment made in the third quarter for inventory purchases in second quarter.

jeff jeffy answered 2 years ago
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