Reference no: EM132001334

Questions -

1. Mountaineers sells its rock-climbing shoes worldwide. Mountaineers expects to sell 4,000 pairs of shoes for $165 each in January, and 2,000 pairs of shoes for $220 each in February. All sales are cash only.

Requirement - Prepare the sales budget for January and February.

2. Review your results from exercise 3. Mountaineers expects cost of goods sold to average 75% of sales revenue, and the company expects to sell 4,600 pairs of shoes in March for $240 each. Mountaineers' target ending inventory is $18,000 plus 45% of the next month's cost of goods sold.

Requirement - Use this information and the sales budget prepared in S21-3 to prepare Mountaineers' inventory, purchases, and cost of goods sold budget for January and February.

3. Refer to the Mountaineers' sales budget that you prepared in exercise 3. Now assume that Mountaineers' sales are 20% cash and 80% on credit. Mountaineers' collection history indicates that credit sales are collected as follows:

30% of month in sales

60% of month after the sale

7% two months after the sale

3% never collected

Mountaineers has $8,600 cash on hand on December 1. The company requires a minimum cash balance of $7,400. December cash collections are $548,600. Total cash payments for December are $563,230.

Requirement - Prepare a cash budget for December. Will Mountaineers need to borrow cash by the end of December?

November sales totaled $386,000 and December sales were $399,500.

Requirement - Prepare a schedule for the budgeted cash collections for January and February.