Question

Paymore Products places orders for goods equal to 75% of its sales forecast in the next quarter. The sales forecasts for the next five quarters are as follows:

	Quarter in Coming Year					Following Year
	First	Second	Third	Fourth		First Quarter
Sales forecast	$372	$360	$336	$384		$384

Calculate Paymore's cash payments to its suppliers assuming that two-thirds of the purchases are paid for in the quarter that they are purchased and one-third are paid in the following quarter. (Do not round intermediate calculations.)

Quarter 1: Payment = ?

Quarter 2: Payment = ?

Quarter 3: Payment = ?

Quarter 4: Payment = ?

Answer 1

Answer : For the purpose of determining the payment made to suppliers we need to first estimate the amount of Purchase for quarters

	First	Second	Third	Fourth	First quarter of following year
Sales	372	360	336	384	384
Purchase (75% of next quarter's sales)	270 (360*75%)	252 (336*75%)	288(384*75%)	288(384*75%)
Payment 2/3rd in the current quarter	180(270*2/3)	168(252*2/3)	192(288*2/3)	192(288*2/3)
Payment 1/3rd in the next quarter	93(270*75%*1/3)#	90(270*1/3)	84(252*1/3)	96(288*1/3)
Total Payment	273 (180+93)	258 (168+90)	276 (192+84)	288 (192+96)

Note :# Since last quarter's before the current year purchase 1/3rd are to be paid in quarter 1 of the current year.