Question

Badlands, Inc. manufactures a household fan that sells for $20 per unit. All sales are on account, with 45 percent of sales collected in the month of sale and 55 percent collected in the following month. The data that follow were extracted from the company’s accounting records.

• Badlands maintains a minimum cash balance of $18,000. Total payments in January 20x1 are budgeted at $215,000.
• A schedule of cash collections for January and February of 20x1 revealed the following receipts for the period:

  	Cash Receipts
  	January			February
  From December 31 accounts receivable	$	121,000
  From January sales		84,000		$	130,000
  From February sales					75,600

• March 20x1 sales are expected to total 12,000 units.
• Finished-goods inventories are maintained at 15 percent of the following month’s sales.
• The December 31, 20x0, balance sheet revealed the following selected figures: cash, $23,300; accounts receivable, $121,000; and finished goods, $23,550.

Required:

1. Calculate the number of units of finished goods to be manufactured in January 20x1.

2. Calculate the financing required in January, if any, to maintain the firm’s minimum cash balance.

Answer 1

Budgets