Answered: Baird Company, which sells electric…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 6E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...

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Baird Company, which sells electric razors, had $330,000 of cost of goods sold during the month of June. The company projects a 8 percent increase in cost of goods sold during July. The inventory balance as of June 30 is $31,000, and the desired ending inventory balance for July is $32,000. Baird pays cash to settle 75 percent of its purchases on account during the month of purchase and pays the remaining 25 percent in the month following the purchase. The accounts payable balance as of June 30 was $44,000.

Determine the amount of purchases budgeted for July.
Determine the amount of cash payments budgeted for inventory purchases in July.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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