Question

Nieto Company’s budgeted sales and direct materials purchases are as follows.

Budgeted Sales Budgeted D.M. Purchases
January $250,600 $32,200
February 238,100 45,300
March 299,600 38,300
Nieto’s sales are 30% cash and 70% 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. Nieto’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) Prepare a schedule of expected collections from customers for March
B) Prepare a schedule of expected payments for direct materials for March.

Answer 1

Nieto Company

A) Schedule of expected collections for March:

30% Cash Sales $89,880

Credit Sales $167,307

Total collections for March $257,187

B) Schedule of expected payments for direct materials for March:

40% month of purchase $15,320

60% ffg month $27,180

Total expected payments $42,500

Step-by-step explanation:

a) Data and Calculations:

January February March Total

Budgeted sales $250,000 $238,100 $299,600

Cash collections:

30% Cash $75,000 $71,430 $89,880

70% Credit $175,000 $166,670 $209,720

Cash collections from credit sales:

Month of sale, 10% $17,500 $16,667 $20,972

Following month, 50% 87,500 83,335

Second month, 36% 63,000

Total collections for March (credit sales) $167,307

Budgeted D.M. Purchases $32,200 $45,300 $38,300

Cash payments:

40% purchase month $12,880 $18,120 $15,320

60% ffg month $19,320 $27,180

Total payments $12,880 $37,440 $42,500