Cash flow analysis. (CMA, adapted) Tab Comp Inc. is a retail distributor for MZB-33 computer…
Cash flow analysis. (CMA, adapted) Tab Comp Inc. is a retail distributor for MZB-33 computer hardware and related software and support services. Tab Comp prepares annual sales forecasts of which the first six months for 201 9 are presented here. Cash sales account for 25% of Tab Comp's total sales, 30% of the total sales are paid by bank credit card, and the remaining 45% are on open account (Tab Comp's own charge accounts}. The cash sales and cash from bank credit-card sales are received in the month of the sale. Bank credit-card sales are subject to a 4% discount deducted atthe time of the daily deposit. The cash receipts for sales on open account are 70% in the month following the sale and 28% in the second month after the sale. The remaining accounts receivable are estimated to be uncollectible. Tab Comp's month-end inventory requirements for computer hardware units are 30% of the next month's sales. A one-month lead time is required for delivery from the manufacturer. Thus, orders for computer hardware units are placed on the 25th of each month to assure that they will be in the store by the first day of the month needed. The computer hardware units are purchased under terms of n/45 (payment in full within 45 days of invoice), measured from the time the units are delivered to Tab Comp. Tab Comp's purchase price for the computer units is 70% of the selling price.
1. Calculate the cash that Tab Comp Inc. can expect to collect during April 2019. Be sure to show all of your calculations.
2. Tab Comp Inc. is determining how many MZB-33 computer hardware units to order on January 25, 2019.
a. Determine the projected number of computer hardware units that will be ordered.
b. Calculate the dollar amount of the order that Tab Comp will place for these computer hardware units.
3. As part of the annual budget process, Tab Comp prepares a cash budget by month for the entire year. Explain why a company such as Tab Comp would do this.