Molly West is developing her retail firm’s budget. She provides you with the following budgeted sales...

Molly West is developing her retail firm’s budget. She provides you with the following budgeted sales data (in units) for the first five months of the year:

	Sales in Units
January	6,400
February	5,800
March	6,000
April	6,100
May	5,600

Each unit sells for $50. Additionally, sales are billed on the last day of the month. For example, all customers making purchases from Molly during April will be sent a bill on April 30. Customers paying within 10 days of the billing date are granted a 4% discount. For example, if a customer purchases $100 worth of merchandise during April and pays her bill by May 10, then she would pay $96. 60% of sales are collected within 10 days of billing date (i.e., during the discount period), 25% within 11-30 days of the billing date, 10% within 31-60 days of the billing date, and 5% are never collected. There are no cash sales – all sales are on credit. (Please assume that each month has 30 days).

Molly pays for all of her inventory in cash during the month purchased. The number of units in each month’s ending inventory equals 110% of the next month’s sales in units. Each unit of merchandise inventory costs Molly $30 (i.e., Molly pays her supplier $30/unit). Selling costs, in total, equal 25% of the current month’s gross (i.e., before any discounts) revenue, and $10,000 of the total selling costs represents monthly non-cash depreciation. Finally, Molly pays 60% of the cash portion of the total selling costs in the month of incurrence and the remaining 40% in the following month.

1. What are the budgeted purchases in April?

2. What are the budgeted cash outflows in April?

3. What are the budgeted cash inflows in April?

Solutions

Expert Solution

ANSWERS ARE AS PER THE ABOVE ATTACHED WORKINGS:

ANS:1. The Budgeted Purchases in the month of April are 5,550 Units for $166,500

ANS:2. The Budgeted Cash Outflows in April are ($166,500 + $65,750) = $232,250

ANS:3 The Budgeted Cash Inflows in April are $276,800.

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ekkarill92 answered 1 year ago

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