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Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall
Edition 9ISBN: 0073527068Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall
Edition 9ISBN: 0073527068
Verified
Step 1 of 2
a. |
| October | November | December | Total |
| Expected sales in units ……… | 12,000 | 14,000 | 20,000 | 46,000 |
| Selling price per unit………… | $25 | $25 | $25 | $25 |
| Total sales …………………… | $300,000 | $350,000 | $500,000 | $1,150,000 |
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b. | Cash collections from: | October | November | December | Total |
| September sales……………… | $221,000a |
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| $ 221,000 |
| October sales………………… | 90,000 | $204,000 |
| 294,000 |
| November sales……………… |
| 105,000 | $238,000 | 343,000 |
| December sales……………… |
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| 150,000 | 150,000 |
| Total cash collections ……… | $311,000 | $309,000 | $388,000 | $1,008,000 |
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| (a) Sales from August and all prior months would have been fully collected (or written off) by the end of September. Thus, the $221,000 net realizable value of accounts receivable represents the 68% of September sales that will be collected in October (13,000 units sold in September * $25 * 68% = $221,000). | ||||
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c. |
| October | November | December | Total |
| Beginning inventory of |
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| finished goods……………… | 3,600 | 4,200 | 6,000 | 3,600 |
| Units to be produced………… | 12,600 | 15,800 | 16,700 | 45,100 |
| Goods available for sale …… | 16,200 | 20,000 | 22,700 | 48,700 |
| Desired ending inventory of |
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| finished goods (30% of next |
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| month’s budgeted sales) …… | (4,200) | (6,000) | (2,700) | (2,700) |
| Quantity of goods sold ……… | 12,000 | 14,000 | 20,000 | 46,000 |
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| (c) To determine the desired ending inventory of raw materials for December, the “units to be produced” in January must be determined. This is done in the same manner as shown in the answer to part c for October, November, and December: | |||||
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| January | |
| Beginning inventory of finished goods (carried over from December)… | 2,700 | ||||
| Units to be produced …………………………………………………… | 9,300 | ||||
| Goods available for sale………………………………………………… | 12,000 | ||||
| Desired ending inventory of finished goods (30% of February’s sales).. | (3,000) | ||||
| Quantity of goods sold ………………………………………………… | 9,000 | ||||
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| 9,300 * 5 pounds * 40% = 18,600 |
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| (d) “Units to be produced” each month (see answer to part c) * 5 pounds per unit. | |||||
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| Note: In the total column, the beginning and ending inventory figures represent the number of pounds on hand at October 1, 2010 and December 31, 2010, respectively. Thus, the “raw materials available for use” line does not add across. | |||||
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e. | Cash payments for: | October | November | December | Total | |
| September purchases………… | $37,980e |
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| $37,980 | |
| October purchases…………… | 97,160 | $41,640 |
| 138,800 | |
| November purchases………… |
| 113,120 | $48,480 | 161,600 | |
| December purchases………… |
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| 96,180 | 96,180 | |
| Total cash payments………… | $135,140 | $154,760 | $144,660 | $434,560 | |
Step 2 of 2
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