Q. Managerial Accounting: Streuling Enterprises

At March 31 Streuling Enterprises, a merchandising organization, had an inventory of 38,000 units, also it had accounts receivable totalling $85,000. Sales, in units, have been budgeted as follows for the next four months:

April 60,000
May 75,000
June 90,000
July 81,000

Streuling's board of directors has established a policy to commence in April which the inventory at the end of each month should contain 40% of the units required for the subsequent month's budgeted sales.

The selling price is $2 per unit. One-third of sales are paid for by consumers in the month of the sale, the balance is collected in the subsequent month.

Required:

a. Prepare a merchandise purchases budget showing Explain how many units should be purchased for each of the months April, May, also June.

b. Prepare a schedule of expected cash collections for each of the months April, May, also June.