How would we go about answering these questions? I am confused as to what these questions are exactly asking. The local ACE hardware store expects to have 40,000 sales transactions in November,amounting to $700,000 in sales revenue. The store expects that 80% of the sales transactions willbe made using credit or debit cards, regardless of the size of the purchase, while the remaining20% will be paid with cash. Although customers use credit cards and debit cards with differingtransactions fees, the average fee charged to the store amounts to $0.30 per transaction plus 2%of the amount charged.1) What kind of cost behavior is this? Could you write a cost equation for it?2) How many sales transactions does ACE expect will be paid by customers using credit ordebit cards?3) How much of November's sales revenue is expected to be paid for by customers usingcredit or debit cards?4) When budgeting for November's operating expenses, how much should ACE anticipatefor credit and debit card transaction fees?5) Assuming the credit and debit card companies process the deposit the same day as thetransaction, how much should ACE budget for cash collections in November from creditand debit card sales?6) How much should ACE budget for cash collections in total for the month of November?

The given question is based on the concepts of budgeting, especially cash budgeting, in which the…

Answered: The local ACE hardware store expects to…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 9P

See similar textbooks

Similar questions

Halifax Shoes has 30% of its sales in cash and the remainder on credit. Of the credit sales, 65% is collected in the month of sale, 25% is collected the month after the sale, and 5% is collected the second month after the sale. How much cash will be collected in August if sales are estimated as $75,000 in June, $65,000 in July, and $90,000 in August?
My Aunts Closet Store collects 60% of its accounts receivable in the month of sale and 35% in the month after the sale. Given the following sales, how much cash will be collected in March?
Nonnas Re-Appliance Store collects 55% of its accounts receivable in the month of sale and 40% in the month after the sale. Given the following sales, how much cash will be collected in February?
American Signs allows customers to pay with their Jones credit card and cash. Jones charges American Signs a 3.5% service fee for each credit sale using its card. Credit sales for the month of June total $328,430, where 40% of those sales were made using the Jones credit card. Based on this information, what will be the total in Credit Card Expense at the end of June?
Dollar Saver Store is a local discount store with the following information: • October sales are projected to be $300,000. • Sales are projected to increase by 15%in November and another 30% in December and then return to the October level in January. • 20% of sales are made in cash while the remaining 80% are paid by credit or debit cards. The credit card companies and banks (debit card issuers) charge a 1% transaction fee, and deposit the net amount (sales price less the transaction fee) in the store's bank account daily. The store does not accept checks. Because of the payment mechanisms, there is no risk of non-payment or bad-debts. • The store's gross profit is 25% of its sales revenue. For the next several months, the store wants to maintain an ending merchandise inventory equal to $12,000 plus 20%of the next month's cost of goods sold. All purchases for merchandise are made on account and paid in the…
Kent Corner Shoppe is a local convenience store with the following information: October sales were $250,000. Sales are projected to go up by 12% in November and another 30% in December and then return to the October level in January. 20% of sales are made in cash, while the remaining 80% are paid by credit or debit cards. The credit card companies and banks (debit card issuers) charge a 2% transaction fee and deposit the net amount (sales price less the transaction fee) in the store’s bank account daily. Kent Corner Shoppe’s gross profit is 25% of its sales revenue. For the next several months, the store wants to maintain an ending merchandise inventory equal to $15,000+15%$15,000+15% of the next month’s cost of goods sold. The September 30 inventory was $43,125. Expected monthly operating expenses include: Wages of store workers are $9,200 per month Utilities expense of $1,000 in November and $1,500 in December Property tax expense of $2,000 per month Property and liability…
Sullivan Corner Shoppe is a local convenience store with the following information: October sales were $260,000. •Sales are projected to go up by 8% in November (from the October sales) and another 25% in December (from the November sales) and then return to the October level in January. •25% of sales are made in cash, while the remaining 75% are paid by credit or debit cards. The credit card companies and banks (debit card issuers) charge a 4% transaction fee, and deposit the net amount (sales price less the transaction fee) in the store's bank account daily. • Sullivan Corner Shoppe's gross profit is 30% of its sales revenue. • For the next several months, the store wants to maintain an ending merchandise inventory equal to $16,000 + 20% of the next month's cost of goods sold. The September 30 inventory was $52,400. •Expected monthly operating expenses include: •Wages of store workers are $8,500 per month •Utilities expense of $1,800 in…
Best Breath is a retail store selling home oxygen equipment. Best Breath also services home oxygen equipment, for which the company bills customers monthly. Best Breath has budgeted for increases in service revenue of $100 each month due to a recent advertising campaign. The forecast of sales and service revenue for March-June 2018 is as follows: Almost all of the sales revenues of the oxygen equipment are credit card sales; cash sales are negligible. The credit card company deposits 97% of the revenues recorded each day into Best Breath's account overnight. For the servicing of home oxygen equipment, 75% of oxygen services billed each month is collected in the month of the service, and 25% is collected in the month following the service.
Almost all of the sales revenues of the oxygen equipment are credit card sales; cash sales are negligible. The credit card company deposits 97% of the revenues recorded each day into HealthMart’s account overnight. For the servicing of home oxygen equipment, 60% of oxygen services billed each month is collected in the month of the service, and 40% is collected in the month following the service. Q. Calculate the cash that HealthMart expects to collect in April, May, and June 2018 from sales and service revenues. Show calculations for each month.
Sara is considering whether to open a gadgets shop. She provided you, as a consultant, the following information: Sales of $60,000 and $72,000 are expected for July and August, respectively. All goods are sold on account. The collection pattern for Accounts Receivable is 80 percent in the month of sale and 20 percent in the month following the sale. Purchases of $40,000 and $54,000 are expected for July and August. The payment pattern for purchases is 70 percent in the month of purchase, 30 percent in the month following the purchase. Other monthly expenses are $8,000, which includes $2000 of depreciation. All operating expenses are paid in the month of their incurrence. $2,000 of cash is available on August 1, 2021. Required: Prepare the cash collection budget for the two months ending August 31, 2021 Prepare the cash budget for the two months ending August 31, 2021
A home gods retailer offers a sales incentive program where customers receive credit towards future purchases based on the dollar amount of their purchases today. For every $10 spent, a customer receives a $1 credit to use in the next 30 days. Based upon historical trends, the firm estimates that 35% of the credits will be redeemed. In the next month, consistent with the firm’s estimate, 35% of the credits were redeemed. The entry recorded to account for the redemption of these credits (excluding the effect of the costs of sales entry): A.) Increases Liabilities, Increases Stockholders’ Equity B.) Increases Liabilities, Reduces Stockholders’ Equity C.) Reduces Liabilities, Reduces Stockholders’ Equity D.) Reduces Liabilities, Increases Stockholders’ Equity C.) No entry needed
Rainbow Inc.'s sales equal $200,000 each month. Rainbow generally permits credit purchases with terms of 3/10 net 30. Ten (10) percent of total sales are for cash, and the remaining 90 percent pay on credit. Of the credit sales, 20 percent are paid on Day 10 of the billing cycle, and the rest pay on Day 30 (in the following month). What is the amount of the discounts that Rainbow's customers normally take?

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Principles of Accounting Volume 1

Accounting

ISBN:

9781947172685

Author:

OpenStax

Publisher:

OpenStax College

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Principles of Accounting Volume 1

Accounting

ISBN:

9781947172685

Author:

OpenStax

Publisher:

OpenStax College

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

SEE MORE TEXTBOOKS