Colosimo Company started business on January 1, 2017. Thecompany estimated that sales for the first six months would be asfollows:
January - 10,000 units, $60,000
February - 8,000 units, $48,000
March - 15,000 units, $90,000
April - 17,000 units, $102,000
May - 22,000 units, $132,000
June - 30,000 units, $180,000
The company sells all items on account and expects collectionsof accounts receivable to be as follows: 65% in the month of thesale, and the remaining 35% in the month after the sale.
Required:
(a) Compute the expected cash collections during the months ofJanuary, February, March, April, May and June.
(b) The company has decided that finished goods inventory at theend of each month should ideally be equal to 45% of next monthâssales. What should budgeted production be for each month?
(c) It takes three pounds of raw material to make one unit offinished product. The company wants to keep an ending inventory ofraw material equal to 40% of next monthâs production needs. Howmany pounds of raw material should be purchased in each month?
(d) The raw material costs $2.75 per pound. The company pays for75% of its purchases during the month of purchase and the remainderin the following month. How much cash will be disbursed during eachmonth for the purchase of raw material?
(e) The projected cash balance on March 1 is $19,500. What isthe estimated cash balance at the end of the month? (Prepare aformal cash budget for the month of March.)
Colosimo Company started business on January 1, 2017. Thecompany estimated that sales for the first six months would be asfollows:
January - 10,000 units, $60,000
February - 8,000 units, $48,000
March - 15,000 units, $90,000
April - 17,000 units, $102,000
May - 22,000 units, $132,000
June - 30,000 units, $180,000
The company sells all items on account and expects collectionsof accounts receivable to be as follows: 65% in the month of thesale, and the remaining 35% in the month after the sale.
Required:
(a) Compute the expected cash collections during the months ofJanuary, February, March, April, May and June.
(b) The company has decided that finished goods inventory at theend of each month should ideally be equal to 45% of next monthâssales. What should budgeted production be for each month?
(c) It takes three pounds of raw material to make one unit offinished product. The company wants to keep an ending inventory ofraw material equal to 40% of next monthâs production needs. Howmany pounds of raw material should be purchased in each month?
(d) The raw material costs $2.75 per pound. The company pays for75% of its purchases during the month of purchase and the remainderin the following month. How much cash will be disbursed during eachmonth for the purchase of raw material?
(e) The projected cash balance on March 1 is $19,500. What isthe estimated cash balance at the end of the month? (Prepare aformal cash budget for the month of March.)