Final Fa2009 Solution

1 toys galore is concerned about the impact of the

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Unformatted text preview: age of the exam. 1. Toys Galore is concerned about the impact of the economy on its cash collections and wants to make sure it will have enough cash on hand to purchase inventory for Christmas sales. Its owner made the following sales estimates for the months leading up to its Christmas rush. August September October November December Sales $90,000 $80,000 $140,000 $175,000 $250,000 Based on past experience and current economic trends, Toys Galore expects only 40% of its sales to be cash sales. The rest will be credit sales. Collections of credit sales are estimated to occur as follows. • 0% collected in the month of sale • 68% collected in the month after sale • 22% collected two months after sale • 10% uncollectible Compute the amount of cash that Toys Galore expects to collect from customers in November. November cash sales 40%($175,000) Nov. credit sales collected in Nov. Oct. credit sales collected in Nov. 68%(60%)($140,000) Sept. credit sales collected in Nov. 22%(60%)($80,000) Total cash collected from customers in November $70,000 0 57,120 10,560 $137,680 2. Toys Galore sells Wii game consoles and other popular toys. It made the following estimates about Wii sales. August September October November December Sales Volume 20 10 40 50 125 Because customers will buy the consoles elsewhere if Toys Galore does not have them in stock, management’s target beginning inventory is 80% of budgeted sales for the month. Toys Galore purchases the Wii consoles for $125 each and marks them up 60%, selling them for $200 each. Toys Galore must pay for the consoles at time of purchase. Compute the number of Wii consoles that Toys Galore must purchase in November and the amount of cash it will need to purchase them. Units needed for Nov. sales Units needed for Dec. beginning inventory 80%(125) Total needed Units on hand at beginning of November 80%(50) Units needed to be purchased Cost per unit Total cash needed to purchase units in November 50 100 150 40 110 $125 $13,750 6A:002 Fall 2009 – Final Exam Page 3 Use the following information about 4UrSuccess to a...
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This note was uploaded on 09/29/2011 for the course 06A 002 taught by Professor Stuff during the Spring '11 term at University of Iowa.

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