"18. Pirate Video Company has made the following sales projections for the next sixmonths. All sales are credit sales. March $24,000 June$28,000April 30,000 July35,000May 18,000 August38,000 Sales in January and February were $27,000 and $26,000, respectively.Experience has shown that of total sales, 10 percent are uncollectible, 30 percent arecollected in the month of sale, 40 percent are collected in the following month, and 20percent are collected two months after sale.Prepare a monthly cash receipts schedule for the firm for March through August.Of the sales expected to be made during the six months from March through August,how much will still be uncollected at the end of August? How much of this is expected tobe collected later?S4-18 4-18. Solution:Pirate Video CompanyCash Receipts Schedule January February March April May June July AugustSales $27,000 $26,000 $24,000 $30,000 $18,000 $28,000 $35,000 $38,000Collections(30% ofcurrent sales)7,200 9,000 5,400 8,400 10,500 11,400Collections (40% of prior month’s sales)10,400 9,600 12,000 7,200 11,200 14,000Collections(20% of sales 2 months earlier)5,400 5,200 4,800 6,000 3,600 5,600Total cashreceipts$23,000 $23,800 $22,200 $21,600 $25,300 $31,000Still due (uncollected) in August:Bad debts: ($24,000 + 30,000 + 18,000 + 28,000 + 35,000 + 38,000) × .1 = (173,000) × .1 = $17,300To be collected from August sales: ($38,000 × .60) = $22,800To be collected from July sales: ($35,000 × .20) = $7,000$17,300 + $22,800 + $7,000 = $47,100 dueExpected to be collected: $47,100 due – $17,300 bad debts = $29,800 to be collectedS4-19 19. The Elliot Corporation has forecast the following sales for the first seven months of theyear:January $12,000 May $12,000February 16,000 June 20,000March 18,000 July 22,000April 24,000 Monthly material purchases are set equal to 20 percent of forecasted sales for the nextmonth. Of the total material costs, 40 percent are paid in the month of purchase and 60percent in the following month. Labor costs will run $6,000 per month, and fixedoverhead is $3,000 per month. Interest payments on the debt will be $4,500 for bothMarch and June. Finally, Elliot’s salesforce will receive a 3 percent commission on totalsales for the first six months of the year, to be paid on June 30.Prepare a monthly summary of cash payments for the six-month period from Januarythrough June. (Note: Compute prior December purchases to help get total materialpayments for January.)S4-20 4-19. Solution:Elliot CorporationCash Payments Schedule Dec. Jan. Feb. March April May June JulySales$12,000 $16,000 $18,000 $24,000 $12,000 $20,000 $22,000Purchases (20%of next month’s sales) 2,400 3,200 3,600 4,800 2,400 4,000 4,400Payment (40%of currentpurchases) 1,280 1,440 1,920 960 1,600 1,760Materialpayment (60% of previous 1,4401,9202,1602,8801,4402,400month’spurchases)Total paymentfor materials 2,720 3,360 4,080 3,840 3,040 4,160Labor costs6,000 6,000 6,000 6,000 6,000 6,000 Fixed overhead3,000 3,000 3,000 3,000 3,000 3,000 Interestpayments4,500 4,500Salescommission(3% of 3,060$102,000)Total payments$ 11,720 $12,360 $17,580 $12,840 $12,040 $20,720 S4-21 S4-2220. Wright Lighting Fixtures forecasts its sales in units for the next four months as follows:March 4,000April 10,000May 8,000June 6,000Wright maintains an ending inventory for each month in the amount of one and one-halftimes the expected sales in the following month. The ending inventory for February(March’s beginning inventory) reflects this policy. Materials cost $7 per unit and are paidfor in the month after production. Labor cost is $3 per unit and is paid for in the monthincurred. Fixed overhead is $10,000 per month. Dividends of $14,000 are to be paid inMay. Eight thousand units were produced in February.Complete a production schedule and a summary of cash payments for March, April,and May. Remember that production in any one month is equal to sales plus desired endinginventory minus beginning inventory.4-20. Solution:Wright Lighting FixturesProduction Schedule March April May JuneForecasted unit sales 4,000 10,000 8,000 6,000+Desired ending 15,000 12,000 9,000 inventory–Beginning inventory 6,000 15,000 12,000 Units to be produced 13,000 7,000 5,000 Cash Payments Feb March April MayUnits produced 8,000 13,000 7,000 5,000Materials ($7/unit)month after production $56,000 $91,000 $49,000Labor ($3/unit) monthof production 39,000 21,000 15,000Fixed overhead10,000 10,000 10,000Dividends14,000Total Cash Payments$105,000 $122,000 $88,000 "