Chapter 04: Financial Forecasting
4-14. Solution:
Convex Mechanical Supplies
Sales (17,000 @ $20) $340,000
Cost of goods sold:
Old inventory:
Quantity (units)…….……….. 5,000
15. Gross profit and ending inventory (LO2) The Bradley Corporation produces a product
with the following costs as of July 1, 20X1:
Material….............. $4 per unit
Labor….……........... 4 per unit
Chapter 04: Financial Forecasting
Overhead 2 per unit
Beginning inventory at these costs on July 1 was 3,250 units. From July 1 to December
1, 20X1, Bradley produced 12,500 units. These units had a material cost of $5, labor of $4,
and overhead of $5 per unit. Bradley uses LIFO inventory accounting.
Assuming that Bradley sold 14,000 units during the last six months of the year at $19
each, what is its gross profit? What is the value of ending inventory?
4.15. Solution:
Bradley Corporation (Continued)
Sales (14,000 @ $19) $266,000
Cost of goods sold:
New inventory:
Quantity (units)…......... 12,500
Cost per unit………........ $ 14
Total….……..................... $175,000
Chapter 04: Financial Forecasting
16. Gross profit and ending inventory (LO2) Sprint Shoes Inc. had a beginning inventory of
9,250 units on January 1, 20X1. Costs associated with the inventory:
Material….............. $15.00 per unit
Labor….……........... 8.00 per unit
Overhead............... 7.10 per unit
During 20X1, the firm produced 43,000 units with the following costs:
Material….............. $17.50 per unit
Labor….……........... 8.80 per unit
Overhead............... 10.30 per unit
Sales for the year were 47,350 units at $44.60 each. Sprint Shoes uses LIFO accounting.
What was the gross profit? What was the value of ending inventory?
4-16. Solution:
Sprint Shoes Inc.
Sales (47,350 @ $44.60) $2,111,810
Cost of goods sold:
New inventory:
Chapter 04: Financial Forecasting
17. Schedule of cash receipts (LO2) J. Lo’s Clothiers has forecast credit sales for the fourth
quarter of the year as:
September (actual)……………………….. $70,000
Fourth Quarter
October………………………………………. $60,000
November………………………..…………. 55,000
December.……….…………………………. 80,000
Experience has shown that 30 percent of sales are collected in the month of sale, 60 percent
in the following month, and 10 percent are never collected.
Prepare a schedule of cash receipts for J. Lo’s Clothiers covering the fourth quarter
(October through December).
4-17. Solution:
J. Lo’s Clothiers
Septembe
r
October November December
Credit sales $70,000 $60,000 $55,000 $80,000
18. Schedule of cash receipts (LO2) Simpson Glove Company has made the following sales
projections for the next six months. All sales are credit sales.
Chapter 04: Financial Forecasting
March….…………………….. $41,000
April…..……………………… 50,000
May…………………………… 32,000
June…………………………… 47,000
July………………..………….. 58,000
August………..………….….. 62,000
Sales in January and February were $41,000 and $39,000, respectively. Experience has
shown that of total sales receipts 10 percent are uncollectible, 40 percent are collected in
the month of sale, 30 percent are collected in the following month, and 20 percent are
collected two months after sale.
Prepare a monthly cash receipts schedule for the firm for March through August.
Chapter 04: Financial Forecasting
4-18. Solution:
Simpson Glove Company
Cash Receipts Schedule
January February March April May June July August
Sales $41,000 $39,000 $41,000 $50,000 $32,000 $47,000 $58,000 $62,000
Collections
(40% of
current sales)
16,400 20,000 12,800 18,800 23,200 24,800
Chapter 04: Financial Forecasting
19. Schedule of cash receipts (LO2) Watt’s Lighting Stores made the following sales
projection for the next six months. All sales are credit sales.
March….…………………….. $35,000
April…..……………………… 41,000
May…………………………… 30,000
June…………………………… 39,000
July………………..………….. 47,000
August………..………….….. 49,000
Sales in January and February were $38,000 and $37,000, respectively.
Experience has shown that of total sales, 10 percent are uncollectible, 30 percent are
collected in the month of sale, 40 percent are collected in the following month, and 20
percent are collected two months after sale.
Prepare a monthly cash receipts schedule for the firm for March through August.
Of the sales expected to be made during the six months from March through August,
how much will still be uncollected at the end of August? How much of this is expected to
be collected later?
Chapter 04: Financial Forecasting
4-19. Solution:
Watt’s Lighting Stores
Cash Receipts Schedule
January Februar
y
March April May June July August
Sales $38,000 $37,000 $35,00
0
$41,00
0
$30,000 $39,00
0
$47,00
0
$49,000
Chapter 04: Financial Forecasting
20. Schedule of cash payments (LO2) Ultravision Inc. anticipates sales of $290,000 from
January through April. Materials will represent 50 percent of sales, and because of level
production, material purchases will be equal for each month during the four months of
January, February, March, and April.
Materials are paid for one month after the month purchased. Materials purchased in
December of last year were $25,000 (half of $50,000 in sales). Labor costs for each of the
four months are slightly different due to a provision in the labor contract in which bonuses
are paid in February and April. Here are the labor figures:
January..…………………….. $15,000
February…………………….. 18,000
March….…………………….. 15,000
April…..……………………… 20,000
Fixed overhead is $11,000 per month. Prepare a schedule of cash payments for January through
April.
Chapter 04: Financial Forecasting
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