Reference no: EM133140373

Question - Sales are billed twice monthly, on the 10th of the month for sales made in the last half of the prior month, and on the 20th of the month for sales made in the first half of the current month. The terms of sales are 2/10, net 30. The expected collection experience of accounts receivable is as follows:

Within the discount period 80%

On the 30th day 18%

Uncollectible 2%

Sales for the month of May were $750,000. Forecast sales for the next 4 months are as follows:

June $800,000

July $900,000

August $900,000

September $600,000

Beta's average mark-up on its products is 20% of the sales price. Beta purchases sufficient merchandise for resale to meet the current month's sales and to have an ending inventory of 25% of the next month's forecast sales.

All purchases are on credit with terms of net 30. Beta pays for one-half of a month's purchases in the month of purchase and the other half in the month following purchase. All purchases and sales occur evenly throughout the month.

Required -

a. How much will be collected in September from sales made in August?

b. What is the amount of expected accounts receivable collections during July?

c. How much merchandise should Beta purchase in August?

d. Help me state two benefits of cash budgeting.