Question

Paddu Company’s budgeted sales and direct materials purchases follow. January was the first month of operations.

Budgeted sales:

January $139,800; February $189,600; March $251,300

Budgeted direct materials purchases:

January $39,700; February $34,900; March $40,000

Paddu’s sales are 35% cash and 65% credit. It collects credit sales 40% in the month of sale, 60% in the month following the sale.

Paddu’s purchases are 40% cash and 60% on account. It pays purchases on account 60% in the month of purchase, and 40% in the month following purchase. Prepare a schedule of expected payments for direct materials for January, February and March.

Answer 1

Sales Collection Schedule
	Jan	Feb	Mar
Budgeted Sales	$        139,800	$        189,600	$        251,300
Cash sales (35%)	$          48,930	$          66,360	$          87,955
Credit Sales (65%)	$          90,870	$        123,240	$        163,345
Collection of sales:
Cash sales	$          48,930	$          66,360	$          87,955
Jan credit sales(40% & 60%)	$          36,348	$          54,522
Feb credit sales(40% & 60%)		$          49,296	$          73,944
Mar credit sales(40% & 60%)			$          65,338
Total collections	$          85,278	$        170,178	$        227,237
Direct Material Payment schedule
	Jan	Feb	Mar
Budgeted Direct material purchases	$          39,700	$          34,900	$          40,000
Cash purchases(40%)	$          15,880	$          13,960	$          16,000
Credit purchases(60%)	$          23,820	$          20,940	$          24,000
Payment schedule:
Cash Payment	$          15,880	$          13,960	$          16,000
Jan credit purchase payment (60% & 40%)	$          14,292	$            9,528
Feb credit purchase payment (60% & 40%)		$          12,564	$            8,376
Mar credit purchase payment (60% & 40%)			$          14,400
Total payment	$          30,172	$          36,052	$          38,776