OKILA Ltd started its operations in the production of detergents in early 2021. However, the management decided to diversify its business model by incorporating additional products, that of Sanitizers, from 2022 onwards. A consultant (Leon) was engaged to carry out a study and provide estimates for 2022 operations. The following was the information provided after the use of one forecasting technique: OKILA Ltd, will be manufacturing 1,000 sanitizers in boxes of 50 in each box (MAKING A SET) in 2022. According to estimates by the Individual Consultant, Leon, the OKILA Ltd will have an expected unit sales increased by 10% in quarter one, 12% in quarter two, 16% in quarter three and four. Accounts receivable at the beginning of the year stood at K5,000,000. This amount is expected to collected in the 1st Quarter of 2022 Price/ Unit will be increasing by 15% in each Quarter due to expected inflationary pressures. In the 1st Quarter the price per set will be K3,000. Since OKILA Ltd sells its sanitizers on credit to some of its loyal customers and that of each quarter’s sales, 85 % will be collected in the 1st Quarter of the sale; 10% is collected in the following quarter; and 5% is bad debt. Required: a). Calculate OKILA Ltd sales budget for one year on quarterly basis. b). What is the amount of accounts receivable at the end of Dec.,2022 whose amount will be received in the 1st quarter of 2023?

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter26: Capital Budgeting (capbud)

Section: Chapter Questions

Problem 5R

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OKILA Ltd started its operations in the production of detergents in early 2021. However, the management decided to diversify its business model by incorporating additional products, that of Sanitizers, from 2022 onwards. A consultant (Leon) was engaged to carry out a study and provide estimates for 2022 operations. The following was the information provided after the use of one forecasting technique:

OKILA Ltd, will be manufacturing 1,000 sanitizers in boxes of 50 in each box (MAKING A SET) in 2022.

According to estimates by the Individual Consultant, Leon, the OKILA Ltd will have an expected unit sales increased by 10% in quarter one, 12% in quarter two, 16% in quarter three and four.

Accounts receivable at the beginning of the year stood at K5,000,000. This amount is expected to collected in the 1^st Quarter of 2022

Price/ Unit will be increasing by 15% in each Quarter due to expected inflationary pressures. In the 1^st Quarter the price per set will be K3,000.

Since OKILA Ltd sells its sanitizers on credit to some of its loyal customers and that of each quarter’s sales, 85 % will be collected in the 1st Quarter of the sale; 10% is collected in the following quarter; and 5% is bad debt.

Required:

a). Calculate OKILA Ltd sales budget for one year on quarterly basis.

b). What is the amount of accounts receivable at the end of Dec.,2022 whose amount will be received in the 1st quarter of 2023?

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