Question

Sam Malone’s Photo Store, a manufacturer, started operations on May 1, 2013. The Company makes only one item, a disposable camera that sells for $20.  Sales are collected 60% in the month of sale and 40% in the following month. Cameras are made just in time when ordered so there is no finished goods inventory. 

Sales in units are forecasted as follows:

May
5,000
June
6,000
July
7,000

What would the cash collections in June be?

A. $112,000

B. $88,000

C. $132,000

D. $120,000

Answer 1

Answer

• Correct Answer = Option ‘A’ $ 112,000 = Cash collection in June
• Working

		May	June	Jul
60% Sale	60%	$60,000	$72,000	$84,000
40% Sale	40%	$40,000	$48,000	$56,000
Total Sales		$100,000	$120,000	$140,000

	May	June	Jul
Cash receipts from:
Current month	$60,000	$72,000	$84,000
Previous months	$0	$40,000	$48,000
Total Budgeted Cash receipts	$60,000	$112,000 = ANSWER	$132,000