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Aztec Company sells its product for $160 per unit. Its actual and budgeted sales follow.

	Units	Dollars
April (actual)	3,500	$	560,000
May (actual)	2,600		416,000
June (budgeted)	5,000		800,000
July (budgeted)	4,000		799,000
August (budgeted)	4,500		720,000

All sales are on credit. Recent experience shows that 28% of credit sales is collected in the month of the sale, 42% in the month after the sale, 27% in the second month after the sale, and 3% proves to be uncollectible. The products purchase price is $110 per unit. 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 24% of the next months unit sales plus a safety stock of 55 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,272,000 and are paid evenly throughout the year in cash. The companys minimum cash balance at month-end is $100,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $100,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 14% interest rate. On May 31, the loan balance is $33,000, and the companys cash balance is $100,000.

Required: 1. Prepare a schedule that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July. 2. Prepare a schedule that shows the computation of budgeted ending inventories (in units) for April, May, June, and July. 3. Prepare the merchandise purchases budget for May, June, and July. Report calculations in units and then show the dollar amount of purchases for each month.

Percent Collected in April May June July August Credit sales from: April May June July August Amount Collected in Total April May June July August Credit sales from: April $560,000 May 416,000 June 800,000 July 640,000 August 720,000

AZTEC COMPANY Budgeted Ending Inventory For April, May, June and July April May June July Next month's budgeted sales (units) Ratio of inventory to future sales Budgeted "base" ending inventory

AZTEC COMPANY Merchandise Purchases Budgets For May, June, and July May June July Required units of available merchandise Budgeted purchases (units) Budgeted cost of merchandise purchases

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