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# Schedule of expected cash collections/purchses budget

14. Caprice Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow:

-Sales are budgeted at \$350,000 for November, \$320,000 for December, and \$300,000 for January.
-Collections are expected to be 80% in the month of sale, 16% in the month following the sale, and 4% uncollectible.
-The cost of goods sold is 70% of sales.
-The company purchases 60% of its merchandise in the month prior to the month of sale and 40% in the month of sale. Payment for merchandise is made in the month following the purchase.
-The November beginning balance in the accounts receivable account is \$78,000.
-The November beginning balance in the accounts payable account is \$254,000.

Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.

15. Jiambalvo Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 40,000 units per month is as follows:

Direct materials............ 38.80
Direct Labor....................9.70
variable selling + administrative expense.. 1.70
fixed selling + administrative expense... 8.80

The normal selling price of the product is \$81.10 per unit.

An order has been received from an overseas customer for 3,000 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be \$0.20 less per unit on this order than on normal sales.

Direct labor is a variable cost in this company.

Required:
a. Suppose the company has ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is \$75.30 per unit. By how much would this special order increase (decrease) the company's net operating income for the month?
b. Suppose the company is already operating at capacity when the special order is received from the overseas customer. What would be the opportunity cost of each unit delivered to the overseas customer?
c. Suppose the company does not have enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 1,000 units for regular customers. What would be the minimum acceptable price per unit for the special order?

#### Solution Summary

The solution examines the schedule of expected cash collections and purchases budget.

\$2.19