Reference no: EM132727796
Aztec Company sells its product for $170 per unit. Its actual and budgeted sales follow.
Units Dollars
April (actual) 5,000 $850,000
May (actual) 2,000 340,000
June (budgeted) 5,500 935,000
July (budgeted) 4,500 934,000
August (budgeted) 4,000 680,000
- All sales are on credit. Recent experience shows that 26% of credit sales is collected in the month of the sale, 44% in the month after the sale, 27% in the second month after the sale, and 3% proves to be uncollectible. The product's purchase price is $110 per unit. 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 24% of the next month's unit sales plus a safety stock of 110 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,260,000 and are paid evenly throughout the year in cash. The company's minimum cash balance at month-end is $110,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $110,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 13% interest rate. On May 31, the loan balance is $32,500, and the company's cash balance is $110,000.
Required:
Problem 1: schedule that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.
Problem 2: schedule that shows the computation of budgeted ending inventories (in units) for April, May, June, and July.
Problem 3: merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of purchases for each month.
Problem 4: schedule showing the computation of cash payments for product purchases for June and July.
Problem 5: cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month.