The Xavier Company Sales Plan

1. The Xavier Company, a merchandising firm, has planned the following sales for the next four months:

| | |March |April |May |June |
| |Total budgeted sales |$70,000 |$50,000 |$80,000 |$60,000 |

Sales are made 40% for cash and 60% on account. From experience, the company has learned that a month’s sales on account are collected according to the following pattern:

| |Month of sale |70% |
| |First month following month of sale |20% |
| |Second month following month of sale |8% |
| |Uncollectible |2% |

The company requires a minimum cash balance of $4,000 to start a month.

Required:

a. Compute the budgeted cash receipts for June.

| |June |
|Sale |60000 |
|Desired EI |0.7 |
|Total |42000 |
|Begin EI |4000 |
|Required Production |38000 |

b. Assume the following budgeted data for June:

| |Materials Purchases |$50,000 |
| | (Paid for in full in the month of purchase) | |
| |Selling and administrative expenses |$12,000 |
| |Depreciation |$6,000 |
| |Equipment purchases |$16,500 |
| |Cash balance, beginning of June |$5,400 |