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
Sales on account
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.)