Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 23

Estimate Purchases and Cash Disbursements

White Products wishes to purchase goods in one month for sale in the next. On March 31, the company has 8,000 portable music players in stock, although sales for the next month (April) are estimated to total 8,600 players. Total sales of players are expected to be 7,000 in May and 7,400 in June.

Portable music players are purchased at a wholesale price of $45. The supplier has a financing arrangement by which White Products pays 60 percent of the purchase price in the month when the players are delivered and 40 percent in the following month. White purchased 10,000 players in March.

Required

a. Estimate purchases (in units) for April and May.

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b. Estimate the cash required to make purchases in April and May.

Step 1 of 12

Merchandising business:

They are involved in buying and selling of goods or products. These companies will sell to retail customers. The main earnings to this type of companies the difference between the bought in price and selling price of the products.