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Kevin Montgomery Retail Seeks Your Assistance to Develop Cash and Other

question 147

Multiple Choice

Kevin Montgomery Retail seeks your assistance to develop cash and other budget information for May, June, and July. At April 30, the company had cash of $5,500, accounts receivable of $437,000, inventories of $446,250, and accounts payable of $133,055. The budget is to be based on the following assumptions:
SALES:
Each month's sales are billed on the last day of the month. Customers are allowed a 3% discount if payment is made within 10 days after the billing date. Receivables are recorded in the accounts at their gross amounts (not net of discounts) . 55% of the billings are collected within the discount period; 30% are collected by the end of the month; 9% are collected by the end of the second month; and 6% turn out to be uncollectible.
PURCHASES:
The marketing, general, and administrative expenses and 60% of all purchases of merchandise are paid in the month purchased, with the remainder of merchandise purchases paid in the following month. The number of units in each month's ending inventory is equal to 125% of the next month's units of sales. The cost of each unit of inventory is $30. Marketing, general, and administrative expenses, of which $3,000 is depreciation, are equal to 15% of the current month's sales.
Actual and projected sales are as shown below:
$\begin{array} { l l l } & \text { Dollars } & \text { Units } \\\text { March } & \$ 472,000 & 11,800 \\\text { April } & \$ 484,000 & 12,100 \\\text { May } & \$ 476,000 & 11,900 \\\text { June } & \$ 456,000 & 11,400 \\\text { July } & \$ 480,000 & 12,000 \\\text { August } & \$ 480,000 & 12,200\end{array}$
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What are the budgeted number of inventory units that need to be purchased in July?

Definitions:

Chi-squared Goodness-of-fit Test

This test assesses if observed frequencies in a single categorical variable match expected frequencies determined from a theoretical distribution.

Multinomial Distribution

A generalization of the binomial distribution, which deals with outcomes of a experiment that can fall into more than two categories.