Question

A merchandising firm by the name of Star Wars Enterprises, had an inventory of 42,000 units on March 31, and it had accounts receivable totaling $83,500. Sales, in units, have been budgeted as follows for the next four months:

April	55,000
May	65,000
June	81,000
July	79,000

To be enforced in April, Star Wars board of directors has established a policy that states that the inventory at the end of each month should contain 35% of the units required for the following month's budgeted sales. $2.5 is the selling price per unit. One-Quarter of sales are paid for by customers in the month of the sale; the balance is collected in the following month.

Required:

1. Prepare a merchandise purchases budget showing how many units should be purchased for  

each of the months April, May, and June.

2. Prepare a schedule of expected cash collections for each of the months April, May, and June.

Answer 1