Martin Clothing Company is a retail company that sells hiking and other outdoor gear specially made for the desert heat. It sells to individuals as well as local companies that coordinate adventure getaways in the desert for tourists. The following information is available for several months of the current year: Month Sales Purchases Cash Expenses Paid
May $96,000 $70,000 $19,000
June 121,000 87,000 24,000
July 133,000 117,000 33,500
August 127,000 72,000 33,600
The majority of Martin's sales (65 percent) are cash, but a few of the excursion companies purchase on credit. Of the credit sales, 40 percent are collected in the month of sale and 60 percent are collected in the following month. All of Martin's purchases are on account with 55 percent paid in the month of purchase and 45 percent paid the following month.
Required:
1. Determine budgeted cash collections for July and August.
2. Determine budgeted cash payments for July and August.

Martin Clothing company

                                                           July        August

1. Budgeted cash collections     $130,480     $128,260

2. Budgeted cash payments     $137,000     $125,850

Explanation:

a) Data and Calculations:

Month         Sales     Purchases  Cash Expenses Paid

May       $96,000      $70,000     $19,000

June        121,000        87,000      24,000

July         133,000       117,000      33,500

August   127,000        72,000      33,600

                         May            June         July             August

Sales          $96,000      $121,000   $133,000     $127,000

Purchases    70,000         87,000      117,000         72,000

Expense       19,000         24,000      33,500         33,600

Cash Collections:

                                  May            June         July             August

Sales                   $96,000      $121,000   $133,000     $127,000

Collections:

65% cash           $62,400       $78,650     $86,450      $82,550

14% month            13,440          16,940         18,620          17,780

21% following                            20,160         25,410         27,930

Total collections for July and August      $130,480     $128,260

Cash payments:

                         May            June         July             August

Purchases    70,000         87,000      117,000         72,000

55%            $38,500       $47,850   $64,350       $39,600

45%                                    31,500      39,150         52,650

Expense       19,000         24,000     33,500         33,600

Payments for July and August      $137,000     $125,850

answer; rapid growth in buyer demand and high buyer switching cost;

reducing the scale of the market for a new product.