Technical Manager

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Project Cost Estimating and Financial Planning

Assignment #2

Dr. : Mohamed Moustafa

Prepared by :

Nashwa El-Shafey

Chapter 2

1. Thirty percent of Sharp Company's sales are for cash and 70% are on account. Sixty percent of the account sales are collected in the month of sale, 25% in the month following sale, and 12% in the second month following sale. The remainder is uncollectible. The following are budgeted sales data for the company:

| | January| February| March| April|
| Total sales| $50,000| $60,000| $40,000| $30,000|

Solution :

* Sharp’s collection pattern is:
* 60% collected in the month of sale,
* 25% collected in the month following sale,
12% collected in the second month following sale
3 % uncollectible

| | January| February| March| April|
| Total sales| | | | |
January sales
60% * 50,000 30,000
25 % * 50,00012,500
12 % * 50,000 6,000
February sales
60% * 60,000 36,000
25 % * 60,000 15,000
12 % * 60,000 7,200
March sales
60% * 40,000 24,000
25 % * 40,00010,000
April sales
60% * 30,000 18,000

Total cash receipts in April are expected to be:
A)$24,640
B)$35,200
C)$31,560
D)$33,640

2. Razz Company is estimating the following sales:

| July| $45,000|
| August| $50,000|
| September| $65,000|
| October| $80,000|
| November| $75,000|
| December| $60,000|

Sales at Razz are normally collected as follows: 10% in the month of sale; 60% in the month following the sale; and the remaining 30% in the second month following the sale. In Razz's budgeted balance sheet at December 31, at what amount will accounts receivable be shown?

Solution :

* Razz’s collection pattern is:
* 10% collected in the month of sale,
* 60% collected in the month following sale,
30% collected in the second month following sale

| | July| August| September | October November December| | Total sales| | | | |
July sales
10% * 45,000 4,500
60 % * 45,000 27,000
30 % * 45,000
13,500
August sales
10% * 50,000 5,000
60 % * 50,000 30,000
30 % * 50,000 15,000

September sales
10% * 65,000 6,500
60 % * 65,000 39,000
30 % * 65,000 19,500

October sales
10% * 80,000 8,000
60 % * 80,000 48,000
30 % * 80,000 24,000

November sales
10% * 75,000 7,500
60 % * 75,000 45,000

December sales
10% * 60,000 6,000

A)$49,500
B)$76,500
C)$120,500
D)$135,500

3. Douglas Company plans to sell 24,000 units of Product A during July and 30,000 units during August. Sales of Product A during June were 25,000 units. Past experience has shown that end-of-month inventory should equal 3,000 units plus 30% of the next month's sales. On June 30 this requirement was met. Based on these data, how many units of Product A must be produced during the month of July?

Solution :
JulyAugust
Budget Sales24,00030,000
Add :Desired ending Inv.12,000
Total Needs 36,000
Less: Beginning Inv. 10,200
Required Production 25,800

A)28,800
B)22,200
C)24,000
D)25,800

4.Villi Manufacturing Corporation's most recent sales budget indicates the following expected sales (in units):

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