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Scotch Company plans to sell 40,000 units (unit selling price is $15) of finished product...

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Accounting

Scotch Company plans to sell 40,000 units (unit selling price is $15) of finished product in July 2017. Management (1) anticipates a growth rate in sales of 5% per month thereafter and (2) desires a monthly ending finished-goods inventory (in units) of 80% of the following month's estimated sales. There are 30,000 completed units in the June 30, 20x1 inventory.

Scotch makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. The ending balance of accounts receivable on June 30 is $80,000, and all of the amount will be collected in July.

a. Prepare a sales budget for the July, August, and September 2017

b. Prepare a production budget for the July, August, and September 2017

c. Prepare a cash collection budget for the July, August, and September 2017

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