Question

49.

Assume a merchandising company’s estimated sales for January, February, and March are $112,000, $132,000, and $122,000, respectively. Its cost of goods sold is always 60% of its sales. The company always maintains ending merchandise inventory equal to 30% of next month’s cost of goods sold. It pays for 20% of its merchandise purchases in the month of the purchase and the remaining 80% in the subsequent month. What are the cash disbursements for merchandise purchases that would appear in the company’s cash budget for February?

Multiple Choice

• $69,120

• $74,120

• $75,120

• $72,120

50.

Assume the following information:

		Amount
Selling price	$	30
Variable expense per unit	$	12
Fixed expenses	$	12,500	per month
Unit sales		2,090	per month

What is the net operating income per month?

Multiple Choice

• $25,120

• $12,620

• $25,080

• $22,990

51.

Assume the following information:

	Amount				Per Unit
Sales	$	300,000				$	40
Variable expenses		120,000					16
Contribution margin		180,000				$	24
Fixed expenses		136,000
Net operating income	$	44,000

If the selling price per unit increases by 10% and unit sales drop by 5%, then the best of estimate of the new net operating income is:

Multiple Choice

• $63,500.

• $155,700.

• $59,700.

• $49,900.

Answer 1

49
	January	February
Budgeted sales	112000	132000
X Cost of goods sold %	60%	60%
Budgeted cost of goods sold	67200	79200
Add: Desired ending inventory	23760	21960
Less: Beginning inventory	-20160	-23760
Budgeted purchases	70800	77400
Payment for January purchases	56640	=70800*80%
Payment for February purchases	15480	=77400*20%
Cash disbursements in February	72120
$72,120 is correct option
50
Unit sales	2090
X Contribution margin per unit	18	=30-12
Contribution margin	37620
Less: Fixed costs	12500
Net operating income	25120
$25,120 is correct option
51
Current unit sales	7500	=300000/40
New unit sales	7125	=7500*(1-5%)
New selling price	44	=40*1.10
Unit sales	7125
X Contribution margin per unit	28	=44-16
Contribution margin	199500
Less: Fixed costs	136000
Net operating income	63500
$63,500 is correct option

Workings for 49:
	January	February
Add: Desired ending inventory	=79200*30%	=122000*60%*30%
Less: Beginning inventory	=67200*30%	=79200*30%