In: Accounting
Moorcroft Company’s budgeted sales and direct materials
purchases are as follows:
Budgeted Sales |
Budgeted D.M. Purchases |
|||
April |
$281,000 |
$46,000 |
||
May |
343,000 |
52,000 |
||
June |
396,000 |
62,000 |
Moorcroft’s sales are 40% cash and 60% credit. Credit sales are
collected 20% in the month of sale, 50% in the month following
sale, and 26% in the second month following sale; 4% are
uncollectible. Moorcroft’s purchases are 50% cash and 50% on
account. Purchases on account are paid 40% in the month following
the purchase and 60% in the second month following the
purchase.
Prepare a schedule of expected collections from customers for
June.
Moorcroft Company |
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Sales |
April |
May |
June |
|||||
April |
$ |
$ |
$ |
$ |
||||
May |
||||||||
June |
||||||||
Total Collections |
$ |
$ |
$ |
Prepare a schedule of expected payments for direct materials for
June.
Moorcroft Company |
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Purchases |
April |
May |
June |
|||||
April |
$ |
$ |
$ |
$ |
||||
May |
||||||||
June |
||||||||
Total Collections |
$ |
$ |
$ |
Moorcroft’s assistant controller suggested that Moorcroft hire a
part time collector to encourage customers to pay more promptly and
to reduce the amount of uncollectible accounts. Sales are still 40%
cash and 60% credit but the assistant controller predicted that
this would cause credit sales to be collected 30% in the month of
the sale, 50% in the month following sale, and 18% in the second
month following sale; 2% are uncollectible.
Prepare a schedule of expected collections from customers for June.
How did these changes impact cash collections?
Moorcroft Company |
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Sales |
April |
May |
June |
|||||
April |
$ |
$ |
$ |
$ |
||||
May |
||||||||
June |
||||||||
Total Collections |
$ |
$ |
$ |
Would it be worth paying the collector $1,000 per month?
It _____ not be worth paying the collector $1,000 per month to improve the cash collections of the company. |
The assistant controller also suggested that the company switch
their purchases to 40% cash and 60% on account to help stretch out
their cash payments. There is no additional interest charge to do
this and Moorcroft is still paying their bills on time. There is no
change to the company’s payment pattern.
Prepare a schedule of expected payments for direct materials for
June.
Moorcroft Company |
||||||||
Purchases |
April |
May |
June |
|||||
April |
$ |
$ |
$ |
$ |
||||
May |
||||||||
June |
||||||||
Total Collections |
$ |
$ |
$ |
How did these changes impact the cash payments for June?
Cash payments increaseddecreased by $ . |