Question

# Problem 1. Capes Corporation has budgeted sale of its popular scooter as follows: Month Units Unit...

Problem 1. Capes Corporation has budgeted sale of its popular scooter as follows:

 Month Units Unit Price Budgeted sales June 20,000 \$10 \$200,000 July 40,000 \$10 \$400,000 August 50,000 \$10 \$500,000 September 30,000 \$10 \$300,000 October 60,000 \$10 \$600,000

From past experience, the company has learned that 40% of a month’s sale are collected in the month of sale, another 60% are collected in the month following the sale.

1. Prepare a schedule of expected cash collections from sales for the third quarter (July, August, September). (10 pts)

1. What is the accounts receivable balance as of the end of September? (5pts)

The company is now in the process of preparing a production budget. Past experience has shown that end-of-month inventory levels must equal 10% of the following month’s unit sales. July’s Beginning finished goods inventory is 4000 units.

1. Prepare a production budget by month and in total, for the third quarter (July, August, September).
 Problem 1 a. Prepare a schedule of expected cash collections from sales for the third quarter (July, August, September). July August September Total Beginning balance accounts receivable July sales August sales September sales Total cash collections b. Accounts receivable balance (end of September): c. Prepare a production budget by month and in total, for the third quarter (July, August, September). July August September Total

#### Homework Answers

Answer #1
 a) Expected Cash Collections from Sales Jul Aug Sep Total Sales Units 40000 50000 30000 120000 Price Per Unit 10 10 10 10 Total Sales 400000 500000 300000 1200000 Collection of Receivables: Same Month 40% 160000 200000 120000 480000 Next Month 60% 120000 240000 300000 660000 a) Expected Cash Collections from Sales 280000 440000 420000 1140000 b) Account Receivables balance at the end of Sep 180000 (300000*60%) b) Production Budget Opening Inventory 4000 5000 3000 4000 Ending Finished Goods Inventory 5000 3000 6000 6000 Production required 41000 48000 33000 122000
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