You are given a choice of taking the simple interest on 100,000 invested for 2 years

ACCT320 Strategic Management Accounting
Chapter 10 Handout Assignment NAME: _______________________
One Stop Jersey Stop (OSJS) sells sports jerseys. OSJS’s management accountant has gathered the
following information for OSJS.
Month Sales Purchases
February $42,000 $17,640
March $48,000 $20,160
April $54,000 $22,680
May $50,000 $21,000
Cash is collected from customers in the following manner:
 Month of the sale 25%
 First month following the sale 40%
 Second month following the sale 20%
 Third month following the sale 10%
 Uncollectable 5%
Purchases of inventory are paid as follows:
 Cash payment in month of purchase 40%
 Cash payment in month following purchase 60%
Additional information:
 Labor costs equal 19% of sales
 Other operating costs equal $15,000 per month that amount includes $4,000 of depreciation.
 Labor and operating costs are paid in the month incurred.
 The cash balance on April 1 is $4,000.
Required: Show all supporting calculations for credit.
1. Calculate the amount of cash receipts for March, April and May.
2. Calculate the amount of cash disbursements for March, April and May.
3. Calculate the cash balance at May 31.
4. Discuss two important reasons why OSJS should prepare cash budgets

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