Determine and complete cash budget for june and july

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Reference no: EM132487119

Axtec Company sells its product for $150 per unit. Its actual and budgeted sales follow.

                                  Units                 Dollars

April (actual)           3,500              $525,000

May (actual)             2,200              330,000

June (budgeted)       5,500               825,000

July (budgeted)        4,500              824,000

August (budgeted)    4100              615,000

Point 1: All sales are on credit. Recent experience shows that 28% of credit sales is collected in the month of the sale, 42% in the month after the sale, 27% in the second month after sale, and 3% proves to be uncollectible. The product's purchase price is $110.00 per unit. 60% of purchases made in a month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 19% of the next month's unit sales plus a safety stock of 170 units.

Point 2: The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and Administrative expenses for the year are $1,620,000 and are paid evenly throughout the year in cash. The company's minimum cash balance at month-end is $130,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 14% interest rate. On May 31, the loan balance is $38,000, and the company's cash balance is $130,000.

Required:

Question 1: Complete schedule that shows the computation of budgeted ending inventories (in units) for April, May, June, and July.

Question 2: Complete the merchandise purchases budget for May, June, and Juky. Report calculations in units and then show the dollar amount of purchases for each month.

Question 3: Complete cash budget for June and July, including any loan activity and interest expense. Calculate the loan balance at the end of each month.

Reference no: EM132487119

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