Question

TabComp Inc. is a retail distributor for MZB-33 computer hardware and related software. TabComp prepares annual...

TabComp Inc. is a retail distributor for MZB-33 computer hardware and related software. TabComp prepares annual sales forecasts, of which the first six months of the coming year are presented below:

Hardware Units

Hardware Dollars

Software
Dollars

Total Sales

January

130

$390,000

$160,000

$550,000

February

120

360,000

140,000

500,000

March

110

330,000

150,000

480,000

April

90

270,000

130,000

400,000

May

100

300,000

125,000

425,000

June

125

375,000

225,000

600,000

Cash sales account for 25% of TabComp's total sales, 30% of the total sales are paid by bank credit card, and the remaining 45% are on open account (TabComp's own charge accounts). The cash and bank credit card sale payments are received in the month of the sale. Bank credit card sales are subject to a 4% discount, which is deducted immediately. The cash receipts for sales on open account are 70% in the month following the sale and 28% in the second month following the sale; the remaining are uncollectible.

TabComp's month-end inventory requirements for computer hardware units are 30% of the next month's sales. The units must be ordered two months in advance due to long lead times quoted by the manufacturer.

1.Calculate the cash that TabComp can expect to collect during April. Show all of your calculations.

2.Determine the number of computer hardware units that should be ordered in January. Show all of your calculations.

Homework Answers

Answer #1

1. Expected cash collections during April: $429400

April
April cash sales (25% x $400000) 100000
April bank credit card sales (30% x $400000 x 96%) 115200
Sales on open account for:
February (28% x 45% x $500000) 63000
March (70% x 45% x $480000) 151200
Expected cash collections $ 429400

2. Number of computer hardware units to be ordered in January: 104

March sales (units) 110
Add: Desired ending inventory (30% x 90) 27
Total needed 137
Less: Beginning inventory (30% x 110) 33
Projected purchases 104

Note: Since the units must be ordered two months in advance, requirements for March will be ordered in January.

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