Question

Ahmed Reeds, a manufacturer of saxophone, oboe, and clarinet reeds, has projected sales to be S902.000 in October, $962,000 in November, $1,030.000 in December, and $922,000 in January Ahmed's sales are 25 % cash and 75 % credt. The company's collection history indicates that credit sales are collected as folows 20% in the month of the sale 65% in the month after the sale 12% two months after the sale 3% are never collected Requirements 1. Prepare a sales budget for all four months, showing the breakdown between cash and credit sales 2. Prepare a cash collection budget for December and January. Round all answers up to the nearest dollar. Requirement 1. Prepare a sales budget for all four months, showing the breakdown between cash and credit sales. Ahmed Reeds Sales Budget For the Four Months Ended January October December November January Cash sales Credt sales Total sales

Answer 1

1. Sales Budget

Ahmed Reeds
Sales Budget
For the four months ended January
	October	November	December	January
Cash sales (25% of total sales)	$225,500	$240,500	$257,500	$230,500
Credit Sales (75% of total sales)	$676,500	$721,500	$772,500	$691,500
Total Sales	$902,000	$962,000	$1,030,000	$922,000

2. Cash Collection Budget for December and January

Ahmed Reeds
Cash Collection Budget
For the month of December and January
S.No.	Particulars	December	January
i.	Total Sales	$1,030,000	$922,000
ii.	Cash Sales	$257,500	$230,500
iii.	Credit sales	$772,500	$691,500
iv.	Credit sales realised in the current month:
	Current month credit sales realised (20% of credit sales )	$154,500	$138,300
	65% realised of the credit sales in the following month	$468,975	$502,125
	12% realised of the credit sales after two months	$81,180	$86,580
v.	Total Cash Collection ( ii + iv)	$962,155	$957,505