Leach-Melicher Ch. 6 - Problems
Unfortunately, the textbook provided an electronic table 6.2 (which is on the final page of this handout) containing typos--the physical text contains a correct version. Specifically, in Schedule 3 you can see the beginning inventory is incorrectly input (it seems that the first one or two digits are dropped); it should be equal to the ending inventory from the previous period. Otherwise it looks OK, including the calculated amount of actual purchases.

1. [Short-Term Financial Planning] The PDC Company was described during the early part of this chapter. Refer to the PDC Company’s projected monthly operating schedules in Table 6.2. PDC’s sales are projected to be $80,000 in September 2011.

A. Prepare PDC’s sales schedule, purchases schedule, and the wages schedule for August 2011.

Here we are focusing just on projecting the month of August. Schedule 1: Sales Forecast Total sales = $92,000; Credit sales (40%) = $36,800; Cash sales (60%) = $55,200 Schedule 2: Cash Collections Cash sales = $55,200; Collection of July’s credit sales = $46,000; Total collections = $101,200 Purchases Schedule: Ending inventory at end of August is estimated as: Forecasted September sales = $80,000 times .8 of sales coverage times .7 to reflect cost of goods sold. Thus, ($80,000 x .8 x .7) = $44,800. PDC adds a $46,000 inventory cushion to get to the target ending inventory for August of: $90,800. Cost of goods sold for August is $64,400 (i.e., $92,000 x .7). Total inventory needed is $90,800 + $64,400 = $155,200 Schedule 3: Purchases $155,200 total inventory needed minus $97,520 beginning inventory (i.e., ending inventory from July) = $57,680 purchases Schedule 4: Disbursements for Purchases Calculated as 50% of July’s purchases plus 50% of August’s purchases: ($67,620 x .5) +