Tiny Toons Distributes Cartoon DVDs That Sell for $12 Each

question 43

Multiple Choice

Tiny Toons distributes cartoon DVDs that sell for $12 each. Tiny Toons pays $7 per DVD to buy the product. Selling costs of $1 per unit are incurred to deliver the DVDs to the customer. This is paid in cash when the product is sold. Tiny Toons has $50,000 per month in fixed selling and administrative expenses (including $3,000 in depreciation) , which are paid half in the month incurred and half in the next month. It is Tiny's policy to maintain an inventory at the end of each month equal to 30% of the next month's projected unit sales.
Tiny Toons makes 30% of sales in cash, and the remainder are on credit. Credit sales are collected in the month after sale. Budgeted monthly sales for the first five months of 2014 are: $$\begin{array} { l l } \text { January } & 20,000 \text { units } \\\text { February } & 22,000 \text { units } \\\text { March } & 26,000 \text { units } \\\text { April } & 28,000 \text { units } \\\text { May } & 40,000 \text { units }\end{array}$$
How much will Tiny Toons report as budgeted Accounts Receivable at March 31 on its balance sheet?

• A) $218,400
• B) $93,600
• C) $278,400
• D) $312,000

Apply concepts of just-in-time (JIT) inventory management in budgeting.

Understand the concept and significance of a cash budget in management.

Comprehend the rationale behind the prioritization of the sales budget.

Learn how to prepare a sales budget and understand its components.

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Definitions:

Investment Banks

Financial institutions that assist individuals, corporations, and governments in raising capital by underwriting and acting as the agent in the issuance of securities.

Commercial Banks

Financial institutions that provide loans, accept deposits, and offer basic financial products like savings accounts to the public.

Financial Matters

Issues or activities related to the management, investment, and control of money and assets.

Venture Capital Fund

A fund that invests in high-growth companies in exchange for equity, or ownership stakes, typically in early-stage companies.