Reference no: EM132768436

At March 31 Streuling Enterprises, a merchandising firm, had an inventory of 38,000 units, and it had accounts receivable totalling $85,000. Sales, in units, have been budgeted as follows for the next four months:

April         60,000
May           75,000
June          90,000
July             81,000

• Streuling's board of directors has established a policy to commence in April that the inventory at the end of each month should contain 40% of the units required for the following month's budgeted sales.
• The selling price is $2 per unit. One-third of sales are paid for by customers in the month of the sale, the balance is collected in the following month.

Required:

Problem a. Prepare merchandise purchases budget showing how many units should be purchased for each of the months April, May, and June.

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