Reference no: EM133126974
Question - Aztec Company sells its product for $160 per unit. Its actual and budgeted sales follow.
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May (Actual)
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June (Budget)
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July (Budget)
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August (Budget)
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Sales units
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2,000
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5,000
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4,000
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4,400
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Sales dollars
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$320,000
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$800,000
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$640,000
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$704,000
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All sales are on credit. Collections are as follows: 24% is collected in the month of the sale, and the remaining 76% is collected in the month following the sale. Merchandise purchases cost $110 per unit. For those purchases, 60% is paid in the month of purchase and the other 40% is paid in the month following purchase. The company has a policy to maintain an ending monthly inventory of 24% of the next month's unit sales. The May 31 actual inventory level of 1,200 units is consistent with this policy. Selling and administrative expenses of $165,000 per month are paid in cash. The company's minimum cash balance at month-end is $110,000. Loans are obtained at the end of any month when the preliminary cash balance is below $110,000. Any preliminary cash balance above $110,000 is used to repay loans at month-end. This loan has a 1.5% monthly interest rate. On May 31, the loan balance is $48,500, and the company's cash balance is $110,000.
Required -
1. Prepare a schedule of cash receipts from sales for each of the months of June and July.
2. Prepare the merchandise purchases budget for June and July.
3. Prepare a schedule of cash payments for merchandise purchases for June and July. Assume May's budgeted merchandise purchases is $299,200.
4. Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month.