Question

ABC Company has budgeted sales for the next six months as follows:

             Budgeted Sales in Units
March             13,000 units                          
April             28,000 units
May               36,000 units
June              12,000 units
July              42,000 units
August            69,000 units

ABC Company sells its inventory to customers for $20 per unit.
30% of the company's sales are cash sales and the other 70% of
sales are made on account. The sales on account are collected
in the pattern:

35% collected in the month of sale
26% collected in the month following sale
19% collected in the second month following sale
12% collected in the third month following sale
8% collected four months after the month of sale

Calculate ABC Company's budgeted cash collections for July.

Answer 1

Answer:

Total Cash Collection in July is $406840.

Explanation:

Computation of Cash Collection in July:

Cash Received from March Month Sale in July = {(13000 units x $20) x 70%} x 8% = {$260000 x 70%} x 8% = $182000 x 8% = $14560

Cash Received from April Month Sale in July = {(28000 units x $20) x 70%} x 12% = {$560000 x 70%} x 12% = $392000 x 12% = $47040

Cash Received from May Month Sale in July = {(36000 units x $20) x 70%} x 19% = {$720000 x 70%} x 19% = $504000 x 19% = $95760

Cash Received from June Month Sale in July = {(12000 units x $20) x 70%} x 26% = {$240000 x 70%} x 26% = $168000 x 26% = $43680

Cash Received from July Month Sale in July = {(42000 units x $20) x 70%} x 35% = {$840000 x 70%} x 35% = $588000 x 35% = $205800

Total Cash Collection in July = $14560 + $47040 + $95760 + $43680 + $205800 = $406840.