Question

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)

2. 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.

3. 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

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