Concept Application:

Show all computations in good form using columnar sheets.

1. Sales of SciFi Corp are expected to be 6,000 units for the month. The company would like to
maintain 15% of unit sales for each month in ending inventory. Beginning inventory is 1,200
units. How many units should the company produce for the coming month?
2. Meridian Company has a beginning inventory of 28,000 units. They intend to sell 100,000 units
for the current month and they wish to reduce ending inventory to 40% of beginning inventory.
How many units should the company produce?
3. Callgate Company has forecast credit sales for the fourth quarter of the year:

September (actual) P100,000

Fourth Quarter:

October 80,000

November 70,000

December 120,000

Based on past experience, 20% of sales are collected in the month of sales, 70% in the following
month and 10% are never collected. Prepare a schedule of cash receipts for the company covering the
last quarter of the year.

4. Narda Corporation's actual sales and purchases for April are shown here along with forecasted
sales and purchases for June through September.

Sales Purchases

April (actual) P640,000 P260,000

May (actual) 600,000 240,000

June (forecast) 550,000 240,000

July (forecast) 550,000 360,000

August (forecast) 580,000 400,000

September (forecast) 660,000 340,000

The company makes 10% of its sales on cash and 90% on credit. Of the credit sales, 20% are
collected in the month after the sale and 80% are collected two months after. The company pays 40% of
its purchases in the month after purchase and 60% two months after.
 Labor expense equals 10% of the current month's sales. Overhead expense equals P24,000/month.
Interest payments of P60,000 are due in June and September. A cash dividend of P100,000 is scheduled
to be paid in June. Taxes of P50,000 are due in June and September. There is a scheduled capital outlay
of P600,000 in September.

The company's ending cash balance in May is P40,000. The minimum desired cash balance is
P30,000. Prepare a schedule of monthly cash receipts, monthly cash payments and a complete monthly
cash budget with borrowing and repayments for June - September. The maximum desired cash balance
is P100,000. Excess cash (above P100,000) is used to buy Trading Securities. Trading securities are sold
prior to borrowing funds in case of a cash shortfall (less than P30,000).