It is November 1 of Year 1. Sales for Julian Company for
November and December of Year 1 and January (of Year 2) are
forecasted to be as follows:
November, 300,000; December 700,000; January, 200,000
On average, cost of goods sold is 60% of sales. During this
period, Julian Company expects inventory levels to remain constant.
This means that inventory purchases are expected to equal the
amount of cost of goods sold.
100% of purchases are on credit. Of the credit purchases, 5% are
paid during the month of the purchase, 35% in the month following
the purchase, and 60% in the second month following the purchase.
Sales for September and October of Year 1 were 100,000 and 150,000,
respectively.
What is the forecasted amount of total cash payments for
purchases in November of Year 1? (Note: This is the sum of
immediate payments from cash purchases, same-month cash payments of
credit purchases, and cash payments for credit purchases made in
prior months.)