The company would like to maintain ending merchandise

Reference no: EM13485166

Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:

·Sales are budgeted at $340,000 for November, $360,000 for December, and $350,000 for January.
·Collections are expected to be 55% in the month of sale, 44% in the month following the sale, and 1% uncollectible.
·The cost of goods sold is 80% of sales.
·The company would like to maintain ending merchandise inventories equal to 70% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
·Other monthly expenses to be paid in cash are $23,100.
·Monthly depreciation is $21,000.
·Ignore taxes.

1. The cost of December merchandise purchases would be:
A. $272,000
B. $288,000
C. $196,000
D. $282,400

2. December cash disbursements for merchandise purchases would be:

A. $283,200

B. $196,000

C. $288,000

D. $282,400

3. The difference between cash receipts and cash disbursements in December would be:
A. $17,000
B. $24,300
C. $41,300
D. $65,600

Reference no: EM13485166

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