Question

2. Jo-Jo’s Yo-yos has the following budgeted sales and direct materials purchases:

Month Budgeted Sales Budgeted direct materials purchases

January $190,000 $30,000

February $210,000 $35,000

March $300,000 $45,000

Jo-Jo’s Yo-yos’ sales are 40% cash and 60% on credit. It collects credit sales 10% in the month of the sale, 50% in the month following the sale, and 36% in the second month following the sale. 4% of the sales are uncollectible.

Jo-Jo’s Yo-yos’ purchases are 50% cash and 50% on account. It pays on account 60% in the month of the purchase and 40% in the month following the purchase.

a. Prepare a schedule of expected cash collections for March.

March cash sales,

March credit sales collections,

January credit sales collections,

February credit sales collections,

Total cash collections.

a. Prepare a schedule of expected cash payments for direct materials for March.

March cash purchases,

March credit purchases paid,

February credit purchases paid,

Total cash collections.

Answer 1

Schedule of expected cash collections for march:-
	January	February	March
Cash sales of January	$ 76,000
Cash sales of February		$ 84,000
Cash Sales of March			$ 1,20,000
credit sales of January	$ 11,400	$ 57,000	$ 41,040
credit sales of February		$ 12,600	$ 63,000
credit Sales of March			$ 18,000
Total cash collections	$ 87,400	$1,53,600	$ 2,42,040
Schedule of expected cash payments for direct material for march:-
	January	February	March
Cash purchases of January	$15,000
Cash purchases of February		$17,500
Cash purchases of March			$ 22,500
credit purchases of January	$ 6,000	$ 9,000
credit purchases of February		$ 7,000	$10,500
credit purchases of March			$9,000
Total cash payments	$ 21,000	$ 33,500	$ 42,000
Formulas and workings for understanding:
	January	February	March
Cash sales of January	$1,90,000 X 40%
Cash sales of February		$2,10,000X 40%
Cash Sales of March			$3,00,000 X 40%
credit sales of January	($1,90,000 X 60% X 10%)	($1,90,000 X 60% X 50%)	($1,90,000 X 60% X 36%)
credit sales of February		($2,10,000 X 60% X 10%)	($2,10,000 X 60% X 50%)
credit Sales of March			($3,00,000 X 60% X 10%)
	January	February	March
Cash purchases of January	$30,000 X 50%
Cash purchases of February		$35,000 X 50%
Cash purchases of March			$45,000 X 50%
credit purchases of January	($30,000 X 50% X 40%)	($30,000 X 50% X 60%)
credit purchases of February		($35,000 X 50% X 40%)	($35,000 X 50% X 60%)
credit purchases of March			($45,000 X 50% X 40%)