Sedman, Corp., has projected the following sales for the coming year: Q1 Q2 Q3 Q4
Sales $850 $930 $890 $990
Sales in the year following this one are projected to be 10 percent greater in each quarter.
a. Calculate payments to suppliers assuming that the company places orders during each quarter equal to 30 percent of projected sales for the next quarter. Assume that the company pays immediately.
b. Calculate payments to suppliers assuming a 90-day payables period.
c. Calculate payments to suppliers assuming a 60-day payables period.

a. Calculate payments to suppliers assuming that the company places orders during each quarter equal to 30 percent of projected sales for the next quarter. Assume that the company pays immediately.

Q1 payment = Q2 sales x 30% = $930 x 30% = $279

Q2 payment = Q3 sales x 30% = $890 x 30% = $267

Q3 payment = Q4 sales x 30% = $990 x 30% = $297

Q4 payment = next year's Q1  sales x 30% = $935 x 30% = $280.50

b. Calculate payments to suppliers assuming a 90-day payables period.

assuming that merchandise is not delivered on the same day that the order was made, the payment should be made on the next quarter. Following A, payables from Q1 would be paid on Q2, payables from Q2 would be paid on Q3, ad finally payables of Q3 would be paid on Q4. Sine sales grow by 10% each year, in order to calculate payables due on Q1 we must divide Q4 sales by 1.1, and then multiply by 30% = ($990 / 1.1) x 30% = $270

Q1 payment = (Q4/1.1) x 30% = $270

Q2 payment = Q2 sales x 30% = $930 x 30% = $279

Q3 payment = Q3 sales x 30% = $890 x 30% = $267

Q4 payment = Q4  sales x 30% = $990 x 30% = $297

c. Calculate payments to suppliers assuming a 60-day payables period.

Same as A since these are quarterly payments, and each quarter has 91 days

Q1 payment = Q2 sales x 30% = $930 x 30% = $279

Q2 payment = Q3 sales x 30% = $890 x 30% = $267

Q3 payment = Q4 sales x 30% = $990 x 30% = $297

Q4 payment = next year's Q1  sales x 30% = $935 x 30% = $280.50

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