(Appendix 10A) Conner Company Is a Medium-Sized Toy Distributor Purchases for the Month of May Are Expected to Be

question 91

Multiple Choice

(Appendix 10A) Conner Company is a medium-sized toy distributor. Experience has shown that 30% of sales are collected within the month of sale, 60% is collected the month after the sale, and 10% is collected two months after the sale. Inventory on hand at the end of a month is to be 70% of the next month's budgeted sales. Cost of goods sold is 50% of the selling price. Payment for purchases is made in the month after purchase. All other costs are paid in the month incurred. Budgeted amounts are as follows: $\begin{array}{ccccccc}&\text { March}&\text { April }&\text { May }&\text { June}&\text { July }&\text { August}\\ \text { Sales } & \$ 10,000 & \$ 20,000 & \$ 30,000 & \$ 30,000 & \$ 50,000 & \$ 40,00 \\ \text {Cost}&&&&&\\ \text { Wages } & & & 1,500 & 2,000 & 2,500 & 1,500 \\ \text { Rent } & & & 500 & 500 & 500 & 500 \\ \text { Other } & & & 400 & 500 & 600 & 500 \\\end{array}$
Purchases for the month of May are expected to be:

• A) $21,000
• B) $15,000
• C) $30,000
• D) $10,500

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Definitions:

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