The Lineberry Golf Cart Co. sold 7,400 carts this year at an average unit price of $3,000. The firm produced the carts at a 44% cost ratio, which is calculated as cost of goods sold (COGS) divided by revenue. At year end, 55 days of sales remained uncollected in accounts receivable, and three months of inventory was on hand (a month of inventory is 1/12 of the year’s COGS).
The golf cart business is booming and management plans a 10% increase in unit sales despite a 4% price increase. The firm has programs in place to improve production efficiency, inventory management, and the effectiveness of collection efforts. It is assumed that these programs will decrease the cost ratio to 40%, lower year-end inventory to two months, and lower year-end receivables to 35 days of sales.
Use the format below to develop this year’s and next year’s revenue and cost of goods sold (COGS) and year ending balance for accounts receivable and inventory. Calculate using a 360-day year and assume sales are evenly distributed over the year. Round your answers for cost ratio in decimals to two decimal places and all other answers to the nearest whole number.
This Year Next Year’s Plan
Units fill in the blank 1 fill in the blank 2
Unit Price $ fill in the blank 3 $ fill in the blank 4
Revenue: $ fill in the blank 5 $ fill in the blank 6
Cost ratio fill in the blank 7 fill in the blank 8
COGS: $ fill in the blank 9 $ fill in the blank 10
Days sales in A/R fill in the blank 11 fill in the blank 12
A/R balance: $ fill in the blank 13 $ fill in the blank 14
Months of Inventory on hand fill in the blank 15 fill in the blank 16
Inventory Balance $ fill in the blank 17 $ fill in the blank 18