Reference no: EM131972315

Problem

All sales of uniforms are made on credit. Sales are billed twice monthly, on the fifth of the month for the last half of the prior month's sales and on the twentieth of the month for the first half of the current month's sales. For accounts paid within the first 10 days after the billing date, gives customers a 2% discount; otherwise the full amount is due within 30 days of the billing date, and customers that do not pay within the 10-day discount period generally wait the full 30 days before making payment. Based on past experience, the collection experience of accounts receivable is:

Within the 10 day discount period - 85%
At 30 days after billing - 13%
Uncollectible - 2%
Sales for May 20X8 were $720,000.
The forecast sales for the next 4 months are:

June $780,000
July 900,000
August 940,000
September 680,000

The companies average markup on its products is 45% of the sales price. Purchases merchandise for resale to meet the current month's sales demand and to maintain a desired monthly ending inventory of 25% of the next month's cost of goods sold. All purchases are on credit. pays for one-half of a month's purchases in the month of purchase and the other half in the month following the purchase. All sales and purchases occur uniformly throughout the month.

How much cash can the company plan to collect from accounts receivable collections during July 20X8?

Compute the budgeted dollar value of the companies inventory on May 21, 20X8

How much merchandise should the company plan to purchase during Jun 20X8?

How much the company budget August 20X8 for cash payments for merchandise purchased?