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The following information pertains to the October operating budget for Flockhart Corporation.
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Budgeted sales for October $100,000 and November $200,000.
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Collections for sales are 60% in the month of sale and 40% the next month.
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Gross margin is 30% of sales.
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Administrative costs are $10,000 each month.
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Beginning accounts receivable (October 1) $20,000.
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Beginning inventory (October 1) $14,000.
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Beginning accounts payable (October 1) $60,000. (All from inventory purchases.)
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Purchases are paid in full the following month.
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Desired ending inventory is 20% of next month's cost of goods sold (COGS).
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No loans are outstanding on October 1
For October, budgeted net income is:
A.
$20,000.
B.
$30,000.
C.
$40,000.
D.
None of the above is correct.
Answer & Explanation
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