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 |
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.
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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