Purchase, cost of goods sold, and cash collection budgets


The Zel Company operates at local flea markets. It has budgeted the following sales for the indicated months.


JUNE JULY August

Sales on account $1,500,000 $1,600,000 $1,700,000

Cash sales 200,000 210,000 220,000

Total sales $1,700,000 $1,810,000 $1,920,000


Zel's success in this specialty market is due in large part to the extension of credit terms and the budgeting techniques implemented by the firm's owner Barbara Zel. Ms. Zel is a recycler; that is, she collects her merchandise daily at neighborhood garage sales and sells the merchandise weekly at regional flea markets. All merchandise is marked up to sell at its invoice cost (as purchased at garage sales) plus 25%. Stated differently, cost is 80% of selling price. Merchandise inventories at the beginning of each month are 30% of that month's forecasted cost of goods sold. With respect to sales on account, 40% of receivables are collected in the month of sale, 50% are collected in the month following, and 10% are never collected.


Question:

What is the anticipated cost of goods sold for June, what is the beginning inventory for July expected to be, what are July purchases expected to be, and what are the forecasted July cash collections?