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The Bruin Corporation's purchases from suppliers in a quarter are equal to 70 percent of the next quarter's forecast sales
The Bruin Corporation's purchases from suppliers in a quarter are equal to 70 percent of the next quarter's forecast sales. The payables period is 60 days. Wages, taxes, and other expenses are 25 percent of sales, and interest and dividends are $122 per quarter. No capital expenditures are planned. Projected quarterly sales are:
Q1Q2Q3Q4Sales$1,290$1,440$1,530$1,740Q1Q2Q3Q4Sales$1,290$1,440$1,530$1,740
Sales for the first quarter of the following year are projected at $1,410.
Calculate Bruin's cash outlays by completing the following:
Q1Q2Q3Q4 Payment of accounts Wages, taxes, other expenses Long-term financing expenses (interest and dividends)Total
Expert Solution
Assuming a uniform flow of purchases with a payment due date of 60 days, each quarter 1/3 of the purchases made during that quarter and 2/3 of the purchases made during the previous quarter will have to be repaid. So payment of accounts = Purchases this quarter * 1/3 + Purchases last quarter * 2/3. will take place in the quarter following the purchases.
| Q1 | Q2 | Q3 | Q4 | Q5 | |
| Sales | 1,290 | 1,440 | 1,530 | 1,740 | 1,410 |
| Purchases = 70% of sales next quarter | 1,008 | 1,071 | 1,218 | 987 | |
| Payment of accounts (see explanation above) | 336 | 1,029 | 1,120 | 1,141 | |
| Wages, taxes, and other expenses 25% of sales | 322.5 | 360 | 382.5 | 435 | |
| Long-term financing expenses | 122 | 122 | 122 | 122 | |
| Total of last 3 rows | $780.5 | $1,511 | $1,524.5 | $1,698 |
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