Question

Swifty Corporation estimates its sales at 190000 units in the first quarter and that sales will increase by 11000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale.

Cash collections for the third quarter are budgeted at

A. 5250500

B. 3024500

C. 4346000

D. 5729579

Answer 1

Sol :

Given expected sales for the First Quarter are =190000 units

It will increase by 11000 for every quarter

So expected sales for Second Quarter = 190000+11000 = 201000 units

Expected sales for the Third Quarter = 201000+11000 = 212000 units

Each unit sells for $25

Total Sales for the Third Quarter = 212000 units * $25 per unit = $5,300,000

40% of sales are for cash = $5,300,000*40% = $2,120,000

Remaining 60% of sales are for credit = $5,300,000*60% = $3,180,000

70% of credit customer pay within the Quarter(cash received from credit customers) = $3,180,000*70% =$2,226,000

So, Total cash received from cash sales and cash received from credit customers

= Cash Sales + Cash Recived from Credit Customers within the same Quarter

= $2,120,000 + $2,226,000

=$4,346,000