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E23-5 Powerdyne Company

Price: $2.50

E23-5 Powerdyne Company’s cost of goods sold is consistently 60% of sales. The company plans to carry ending merchandise inventory for each month equal to 40% of the next month’s budgeted cost of good sold. All merchandise is purchased on credit, and 50% of the purchases made during a month is paid for in that month. Another 35% is paid for during the first month after purchase, and the remaining 15% is paid for during the second month after purchase. Expected unit sales are: August (actual), 150,000; September (actual), 350,000; October (estimated), 200,000; November (estimated), 300,000.

Use this information to determine October’s expected cash payments for purchases. (Hint: Use the layout of Exhibit 23.8, but revised for the facts given here.)

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