Aztec Company sells its product for $170 per unit.
| Aztec Company sells its product for $170 per unit. Its actual and projected sales follow. |
| Units | Dollars | |
| April (actual) | 4,500 | $765,000 |
| May (actual) | 3,400 | 578,000 |
| June (budgeted) | 7,000 | 1,190,000 |
| July (budgeted) | 5,500 | 935,000 |
| August (budgeted) | 3,900 | 663,000 |
| All sales are on credit. Recent experience shows that 26% of credit sales is collected in the month of the sale, 44% in the month after the sale, 25% in the second month after the sale, and 5% proves to be uncollectible. The product’s purchase price is $110 per unit. All purchases are payable within 15 days. Thus, 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 22% of the next month’s unit sales plus a safety stock of 130 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,344,000 and are paid evenly throughout the year in cash. The company’s minimum cash balance at month-end is $130,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $130,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 11% interest rate. On May 31, the loan balance is $39,500, and the company’s cash balance is $130,000. (Round final answers to the nearest whole dollar.) |
1. value:
2.30 points Required information
| Required: | |
| 1. | Prepare a table that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July. |
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