Warning: foreach() argument must be of type array|object, bool given in /var/www/html/web/app/themes/studypress-core-theme/template-parts/header/mobile-offcanvas.php on line 20

Esquire Products Inc. expects the following monthly sales:

January

\(28,000

February

\)19,000

March

\(12,000

April

\)14,000

May

\(8,000

June

\)6,000

July

\(22,000

August

\)26,000

September

\(29,000

October

\)34,000

November

\(42,000

December

\)24,000

Total annual sales

\(264,000

Cash sales are 40 percent in a given month, with the remainder going into accounts receivable. All receivables are collected in the month following the sale. Esquire sells all of its goods for \)2 each and produces them for \(1 each. Esquire uses level production, and average monthly production is equal to annual production divided by 12.

b. Determine a cash receipts schedule for January through December. Assume that dollar sales in the prior December were \)20,000. Work part b using dollars.

Short Answer

Expert verified

The cash received in January is $23,200 and in December is $34,800.

Step by step solution

01

Formula used for calculating the monthly cash receipts

MonthlyCashreceipts=40%×Presentmonthsales+60%×Priormonthssales

02

Cash receipts schedule

Month

January

February

March

April

May

June

Sales

$28,000

$19,000

$12,000

$14,000

$8,000

$6,000

40% cash sales

$11,200

$7,600

$4,800

$5,600

$3,200

$2,400

60% prior month sales

$12,000

$16,800

$11,400

$7,200

$8,400

$4,800

Total cash receipts

$23,200

$24,400

$16,200

$12,800

$11,600

$7,200

Month

July

August

September

October

November

December

Sales

$22,000

$26,000

$29,000

$34,000

$42,000

$24,000

40% cash sales

$8,800

$10,400

$11,600

$13,600

$16,800

$9,600

60% prior month sales

$3,600

$13,200

$15,600

$17,400

$20,400

$25,200

Total cash receipts

$12,400

$23,600

$27,200

$31,000

$37,200

$34,800

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

In Problem 18, what long-term interest rate would represent a break-even point between using short-term financing as described in part a and long-term financing? (Hint: Divide the interest payments in 18a by the amount of total funds provided for the six months and multiply by 12.)

Fast Turnstiles Co. is evaluating the extension of credit to a new group of customers. Although these customers will provide \(180,000 in additional credit sales, 12 percent are likely to be uncollectible. The company will also incur \)16,200 in additional collection expense. Production and marketing costs represent 72 percent of sales. The firm is in a 34 percent tax bracket and has a receivables turnover of four times. No other asset build-up will be required to service the new customers. The firm has a 10 percent desired return.

a. Calculate the incremental income after taxes and the return on incremental investment. Should Fast Turnstiles Co. extend credit to these customers?

Orbital Communications has operating plants in over 100 countries. It also keeps funds for transactions purposes in many foreign countries. Assume in 2010 it held 150,000 kronas in Norway worth \(40,000. The funds drew 13 percent interest, and the krona increased 6 percent against the dollar. What is the value of the holdings, based on U.S. dollars, at year-end?

(Hint: Multiply \)40,000 times 1.13 and then multiply the resulting value by 106 percent.)

Antonio Banderos & Scarves make headwear that is very popular in the fall-winter season. Units sold are anticipated as follows:

October

1,250

November

2,250

December

4,500

January

3,500

Total units

11,500

If seasonal production is used, it is assumed that inventory will directly match sales for each month and there will be no inventory build-up.

However, Antonio decides to go with level production to avoid being out of merchandise. He will produce the 11,500 items over four months at a level of 2,875 per month.

a. What is the ending inventory at the end of each month? Compare the units sales to the units produced and keep a running total.

b. If the inventory costs $8 per unit and will be financed at the bank at a cost of 12 percent, what is the monthly financing cost and the total for the four months? (Use 1 percent or the monthly rate.)

Route Canal Shipping Company has the following schedule for aging of accounts receivable:

b. If the firm had $1,500,000 in credit sales over the four-month period, compute the average collection period. Average daily sales should be based on a 120-day period.

See all solutions

Recommended explanations on Business Studies Textbooks

View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free