Section B Question 1 Harrison Printing has projected its sales for the first eight months of 2019 as follows: (55 marks)
Posted: Sun May 08, 2022 10:04 am
Section B
Question 1
Harrison Printing has projected its sales for the first eight
months of 2019 as follows:
(55
marks)
January
$100,000
February
$120,000
March
$150,000
April
$300,000
May
$275,000
June
$200,000
July
$200,000
August
$180,000
Harrison collects 20% of its sales in the month of sale, 50% in
the month following the sale, and the remaining 30% two months
following the sale. During November and December of 2018,
Harrison’s sales were $220,000 and $175, 000 respectively.
Harrison purchases raw materials two months in advance of its
sales equal 65% of its final sales price. The supplier is paid one
month after delivery. Thus, purchase for April Sales is made in
February and payment in March.
In addition, Harrison pays $10,000 per month for rent and
$20,000 each month for other expenditures. Tax prepayments of
$22,500 are made each quarter beginning in March. The company’s
cash balance as of December 2018 is 22,000; a minimum balance of
$20,000 must be maintained at all times to satisfy the firm’s bank
of line credit agreement. Harrison has arranged with its bank for
short-term credit at an interest of 12% per annum or 1% per month
to be paid monthly. Borrowing to meet estimated monthly needs takes
place at the end of each month and interest is not paid until the
following month. Finally, Harrison follows a policy of repaying its
outstanding short-term debt in any month in which the cash balance
exceeds the desired balance of $20,000.
Question 1
Harrison Printing has projected its sales for the first eight
months of 2019 as follows:
(55
marks)
January
$100,000
February
$120,000
March
$150,000
April
$300,000
May
$275,000
June
$200,000
July
$200,000
August
$180,000
Harrison collects 20% of its sales in the month of sale, 50% in
the month following the sale, and the remaining 30% two months
following the sale. During November and December of 2018,
Harrison’s sales were $220,000 and $175, 000 respectively.
Harrison purchases raw materials two months in advance of its
sales equal 65% of its final sales price. The supplier is paid one
month after delivery. Thus, purchase for April Sales is made in
February and payment in March.
In addition, Harrison pays $10,000 per month for rent and
$20,000 each month for other expenditures. Tax prepayments of
$22,500 are made each quarter beginning in March. The company’s
cash balance as of December 2018 is 22,000; a minimum balance of
$20,000 must be maintained at all times to satisfy the firm’s bank
of line credit agreement. Harrison has arranged with its bank for
short-term credit at an interest of 12% per annum or 1% per month
to be paid monthly. Borrowing to meet estimated monthly needs takes
place at the end of each month and interest is not paid until the
following month. Finally, Harrison follows a policy of repaying its
outstanding short-term debt in any month in which the cash balance
exceeds the desired balance of $20,000.