PrimeTime Sportswear is a custom imprinter that began operations six months ago. Sales have exceeded management's most optimistic projections. Sales are made on account and collected as follows: 49% in the month after the sale is made and 44% in the second month after sale. Merchandise purchases and operating expenses are paid as follows: In the month during which the merchandise is purchased or the cost is incurred75%
In the subsequent month25%
PrimeTime Sportswear's income statement budget for each of the next four months, newly revised to reflect the success of the firm, follows:
September October November December
Sales$41,800 $53,700 $68,100 $58,900
Cost of goods sold:
Beginning inventory$5,530 $14,600 $20,310 $22,050
Purchases 37,800 43,700 49,000 32,600
Cost of goods available for sale$43,330 $58,300 $69,310 $54,650
Less: Ending inventory (14,600) (20,310) (22,050) (20,360)
Cost of goods sold$28,730 $37,990 $47,260 $34,290
Gross profit$13,070 $15,710 $20,840 $24,610
Operating expenses 10,400 13,100 14,300 16,000
Operating income$2,670 $2,610 $6,540 $8,610
Cash on hand August 31 is estimated to be $40,240. Collections of August 31 accounts receivable were estimated to be $19,820 in September and $15,330 in October. Payments of August 31 accounts payable and accrued expenses in September were estimated to be $23,840.