Inman Products estimates its sales at 180,000 units in the first quarter and that sales will increase by 18,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale.
First, let's calculate the desired ending inventory:
Desired ending inventory = 25% x (180,000 + 198,000 + 216,000 + 234,000) = 154,500 units
Next, let's calculate the total units Inman Products needs to produce:
Total units needed = 180,000 + 198,000 + 216,000 + 234,000 - 154,500 = 674,500 units
Now, let's calculate the total sales revenue:
Total sales revenue = Total units x Price per unit = 674,500 x $25 = $16,862,500
40% of sales are for cash, so cash sales revenue = 40% x $16,862,500 = $6,745,000
The remaining 60% of sales are credit sales, so credit sales revenue = 60% x $16,862,500 = $10,117,500
70% of credit customers pay within the quarter, so cash collections from credit sales = 70% x $10,117,500 = $7,082,250
The remainder of credit sales is received in the following quarter, which means the accounts receivable for these sales will be:
Accounts receivable = 30% x $10,117,500 = $3,035,250
Therefore, the total cash inflow for the quarter is:
Cash inflow = Cash sales revenue + Cash collections from credit sales = $6,745,000 + $7,082,250 = $13,827,250
Note: We did not include any information about costs or expenses, so this analysis only provides an estimate of sales revenue and cash inflow.
Inman Products estimates its sales at 180,000 units in the first quarter and that sales will increase by 18,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale.
Production in units for the third quarter should be budgeted at
Question 45 options:
To calculate the production in units for the third quarter, we need to know the total units needed for the first three quarters and subtract the units produced in the first two quarters.
Total units needed for the first three quarters:
180,000 + 198,000 + 216,000 = 594,000 units
Units produced in the first two quarters:
180,000 + 198,000 = 378,000 units
Units needed in the third quarter:
594,000 - 378,000 = 216,000 units
Therefore, the production in units for the third quarter should be budgeted at 216,000 units.
To calculate the information provided, we can break down the steps as follows:
1. Calculate Quarterly Sales:
- In the first quarter, the estimated sales are 180,000 units.
- Starting from the second quarter, sales increase by 18,000 units each quarter.
- Therefore, we can calculate the sales for each quarter by adding 18,000 units to the previous quarter's sales.
2. Calculate Ending Inventory:
- The desired ending inventory is 25% of the total sales for each quarter.
- To calculate the ending inventory, multiply the sales for each quarter by 25% (0.25).
3. Calculate Cash and Credit Sales:
- Cash sales represent 40% of the total sales.
- Credit sales represent the remaining 60% (100% - 40%) of the total sales.
- To calculate cash sales, multiply the total sales for each quarter by 40% (0.40).
- To calculate credit sales, multiply the total sales for each quarter by 60% (0.60).
4. Calculate Cash Receipts:
- 70% of credit customers pay within the same quarter.
- The remaining 30% of credit payments are received in the following quarter.
- To calculate cash receipts in the same quarter, multiply the credit sales for each quarter by 70% (0.70).
- To calculate cash receipts in the following quarter, multiply the credit sales for each quarter by 30% (0.30).
5. Calculate Total Revenue:
- Each unit sells for $25.
- To calculate total revenue, multiply the total sales for each quarter by $25.
By following these steps, you will be able to calculate the relevant information based on the provided data.