Chapter 5 Assinment
967 words 4 pagesTexas Rose Company
Assignment – completely answer the following questions: 1. Tyler’s total sales forecast for the nursery’s first full year of operations is 228,000 plants at an average sales price of $5 per plant. As a first approximation, assume that 30 percent of the firm’s customers will pay 10 days after the sale, 55 percent will pay on the 30th day, and 15 percent will pay on the 60th day. a) What is the firm’s projected days sales outstanding (DSO)? b) What is the projected average daily sales? (Use a 360-day year.) c) What is Texas Rose’s projected average receivables level? d) If Tyler is estimating a gross profit margin, or contribution margin, of 40 percent, how much of the receivables balance must actually …show more content…
DSO is not a good tool in this situation, because the it only imply the collection are more quickly to happen.
4. Construct aging schedules as of the end of March and the end of June. What do these schedules indicate about the customers’ payment patterns? Explain.
Aging Schedule of March Age: | A/R | % | 0-30 | 112000 | 88.19% | 30-60 | 15000 | 11.81% | >60 | 0 | 0 | Total | 127000 | 100% |
Aging Schedule of June Age: | A/R | % | 0-30 | 84000 | 75.68% | 30-60 | 27000 | 24.32% | >60 | 0 | 0 | Total | 111000 | 100% |
The form shows that a lower percentage of A/R are over 30days, in other words, the higher payments will be paid after 30days.
5. Construct the uncollected balances schedule as of the end of March and the end of June. Do these schedules properly measure customers’ payment patterns? If you wanted to monitor one number from the schedule, what would be the best one? Explain your answers. Month | Sales | A/R | % | Jan | 40000 | 0 | 0 | Feb | 100000 | 15000 | 15% | Mar | 160000 | 112000 | 70% | Total | | 127000 | 85% |
Month | Sales | A/R | % | Apr | 240000 | 0 | 0 | May | 180000 | 27000 | 15% | June | 120000 | 84000 | 70% | Total | | 111000 | 85% |
I think these schedules properly measure customers’ payment patterns. I would choose the second one. Because the second schedule is from Apr to Jun, It is in the middle of a year.