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Unformatted text preview: Purchase, cost of goods sold, and cash collection budgets (Appendix 10A) The Zel Company operates at local flea markets. It has budgeted the following sales for the indicated months. June July August Sales on account $1,950,000 $2,080,000 $2,210,000 Cash sales 260,000 273,000 286,000 Total sales $2,210,000 $2,353,000 $2,496,000 Zel's success in this specialty market is due in large part to the extension of credit terms and the budgeting techniques implemented by the firm's owner, Barbara Zel. Ms. Zel is a recycler; that is, she collects her merchandise daily at neighborhood garage sales and sells the merchandise weekly at regional flea markets. All merchandise is marked up to sell at its invoice cost (as purchased at garage sales) plus 25%. Stated differently, cost is 80% of selling price. Merchandise inventories at the beginning of each month are 30% of that month's forecasted cost of goods sold. With respect to sales on account, 40% of receivables are collected in the month of sale, 50% are collected in the month following, and 10% are never collected. (The numbers and symbols in parenthesis corresponds to the coding system in the textbook.) Required Correct....
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- Spring '10