Compcitys month end inventory requirements for

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Chapter 13 / Exercise 13
Survey of Accounting
Warren
Expert Verified
CompCity's month-end inventory requirements for computer hardware uni estimated sales. A one-month lead time is required for delivery from the hardw computer hardware units are generally placed by CompCity on the 25th of ea the store on the first day of the month needed. These units are purchases on n/45, measured from the time the units are delivered to CompCity. Assume th amount of time to pay its invoices. On average, the purchase price for hardwa COMPCITY, Inc. Forecasted Sales (units and dollars) January-June, 2010 Hardware Hardware Software/Support Total Sales (Units) Revenue Services Revenue Revenue January 120 $360,000 $140,000 $500,000 February 130 $390,000 $160,000 $550,000 March 90 $270,000 $130,000 $400,000 April 100 $300,000 $125,000 $425,000 May 110 $330,000 $150,000 $480,000 June 120 $360,000 $140,000 $500,000 Totals 670 $2,010,000 $845,000 $2,855,000 Sales Breakdown Information: Cash Sales = 25.00% Bank Credit-card (VISA) Sales 55.00% In a typical month, total sales are broken down as follows: cash sales, 25%
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Chapter 13 / Exercise 13
Survey of Accounting
Warren
Expert Verified
Open Account (CompCity) = 20.00% Bank collection fee/service charge = 3.00% Collection of Open Accounts: Month of Sale = 25.00% Following Month = 45.00% 2nd Month Following Sale = 27.00% Uncollectible accounts = 3.00% CGS Percentage, Hardware Sales = 65.00% Desired eom Inventory percentage = 30.00% Requirements 1. Calculate estimated cash receipts for April 2010 (show details). 2. The company wants to estimate the number of hardware units to order on J a. Determine the estimated number of units to be ordered b. Calculate the dollar cost (per unit and total) for these units 3. Cash planning in this line of business is critical to success. Management fee ($3,000) is firm--at least for the foreseeable future. Also, it is comfortable wit is not so sure, however, about (a) the CGS rate (because of the state of flux sales in March 2010. Discussions with marketing and purchasing suggest th two variables, as follows: March Outcome Sales CGS% Optimistic 100 60% Expected 90 65% Pessimistic 80 70% The preceding outcomes are assumed to be independent, which means tha You are asked to conduct a sensitivity analysis to determine the range of po different combinations of the above. Assume, for simplicity, that slaes volum Prepare a table disclosing each of the nine possible scenarios that could ex 4. As part of the annual budgeting process, CompCity, Inc. prepares a cash bu in the monthly planning process. company such as CompCity would prepare monthly cash-flow budgets for th
Solution
d software-support services. x month of 2010 are given below. dgeting purposes, assume that nk credit-card sales are subject ompCity's cash account with ollected as follows: 25% in the second month following the month its are 30% of the following month's ware distributor. Thus, orders for ach month to assure availability in n credit, under the following terms: hat CompCity takes the maximum are units runs 65% of selling price. %; VISA ® credit-card sales,
January 25th: els that the assumption of selling price per unit th the 30% rate for end-of-month inventories. It x in the supplier market), and (b) the level of predicted hat three outcomes are possible for each of these at there are nine possible combinations (3 x 3).

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