Final Answer:
The budgeted cash collection from sales for August is $279,600.
Step-by-step explanation:
a. Sales:
August Sales: 5,500 tubes * $60 = $330,000.
b. Cash Collection from Sales:
50% in August: 0.5 * $330,000 = $165,000.
45% in September: 0.45 * $330,000 = $148,500.
Uncollectible: 5% * $330,000 = $16,500.
Total Cash Collection in August = $165,000 + $148,500 - $16,500 = $297,000.
c. Beginning Accounts Receivable (July 1):
$162,500 (given).
d. Finished Goods Inventory (July 1):
20% of September Sales (4,500 tubes) = 900 tubes.
e. Synthetic Rubber Compound Cost:
August production needs: 5,500 tubes * 3 kg = 16,500 kg.
Desired ending inventory (July 1): 20% of 16,500 kg = 3,300 kg.
Cost of synthetic rubber compound = $3.50/kg.
Total cost = 3,300 kg * $3.50 = $11,550.
f. Accounts Payable (July 1):
$12,900 (given).
Adding up the cash collection from sales, beginning accounts receivable, and adjusting for inventory costs and accounts payable:
$297,000 (Cash Collection) + $162,500 (Beginning Receivable) - $11,550 (Rubber Compound Cost) - $12,900 (Accounts Payable) = $279,600.
Therefore, the correct budgeted cash collection for August is $279,600.
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Complete Question
Water Sport Inc. manufactures a small personal water tube used for children learning to swim. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist:
a. The Marketing Department has estimated sales as follows for the remainder of the year (number of water tubes):
July 7,000 October 3,400
August 5,500 November 3,000
September 4,500 December 2,500
The selling price of the water tubes is $60
b. All sales are on account. Based on past experience, sales are expected to be collected in the following pattern
- 50% in the month of sale
- 45% in the month following sale
- 5% uncollectable
The beginning accounts receivable balance (excluding uncollectible amounts) on July 1 will be $162,500
c. The company maintains finished goods inventories equal to 20% of the following month's sales. The inventory of finished goods on July 1 will be 1,400 units
d. Each water tube requires 3 kilograms of synthetic polyisoprene rubber compound. To prevent shortages, the company would like the inventory of synthetic rubber compound on hand at the end of each month to be equal to 20% of the following month's production needs. The inventory of synthetic rubber compound on hand on July 1 will be 4,020 kilograms.
e. The synthetic rubber compound costs $3.50 per kilogram. Water Sport pays for 70% of its purchases in the month of purchase; the remainder is paid for in the following month. The accounts payable balance for synthetic rubber compound purchases will be $12,900 on July 1
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