Question

On October 1 of the current year, Molloy Corporation prepared a cash budget for October, November, and December. All of Molloy's sales are made on account. The following information was used in preparing estimated cash collections:

August sales (actual)	$	46,000
September sales (actual)	$	56,000
October sales (estimated)	$	26,000
November sales (estimated)	$	76,000
December sales (estimated)	$	66,000

Approximately 60% of all sales are collected in the month of the sale, 30% is collected in the following month, and 10% is collected in the month thereafter.

Budgeted collections from customers in October total:

Multiple Choice

• $32,400.

• $47,400.

• $37,000.

• $128,000.

A company with monthly revenue of $148,000, variable costs of $57,000, and fixed costs of $42,800 has a contribution margin of:

Multiple Choice

• $91,000.

• $45,500.

• $148,000.

• $105,200.

Answer 1

Part 1

Schedule of Expected Cash Collection For October
Cash collection from October sales (26,000 x 60%)	15,600
Cash collection from September sales (56,000 x 30%)	16,800
Cash collection from August sales (46,000 x 10%)	4,600
Total cash collection	$37,000

Budgeted collections from customers in October total $37,000

Third option is correct.

Part 2

Revenue = $148,000

Variable costs = $57,000

Fixed costs = $42,800

Contribution margin = Revenue - Variable costs

= 148,000-57,000

= $91,000

First option is correct.