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21 November, 13:25

Hagen Company's budgeted sales and direct materials purchases are as follows.

Budgeted SalesBudgeted D. M. Purchases

January $300,000$60,000

February 330,00070,000

March 350,00080,000

Hagen's sales are 40% cash and 60% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. Hagen's purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month of purchase, and 60% in the month following purchase.

Instructions

(a) Prepare a schedule of expected collections from customers for March.

(b) Prepare a schedule of expected payments for direct materials for March.

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Answers (1)
  1. 21 November, 14:36
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    Results are below.

    Explanation:

    Giving the following information:

    Budgeted Sales - Budgeted D. M. Purchases

    January = $300,000 - $60,000

    February = $330,000 - $70,000

    March = $350,000 - $80,000

    Hagen's sales are 40% cash and 60% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible.

    Hagen's purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month of purchase, and 60% in the month following purchase.

    A) We need to determine the cash collections from sales for March:

    Cash collection:

    Sales in cash = 350,000*0.4 = 140,000

    Sales on account From March = (350,000*0.6) * 0.1 = 21,000

    Sales on account From February = (330,000*0.6) * 0.5 = 99,000

    Sales on account From January = (300,000*0.6) * 0.36 = 64,800

    Total cash = $324,800

    B) We need to determine the cash payments in March:

    Cash payment:

    Purchase in cash = 80,000*0.5 = 40,000

    Purchase on account from March = (80,000*0.5) * 0.4 = 16,000

    Purchase on account from February = (70,000*0.5) * 0.6 = 21,000

    Total cash payment = $77,000
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