Question

Freddie Reeds, a manufacturer of saxophone, oboe, and clarinet reeds, has projected sales to be $890,000 in October $956,000 in November $1,070,000 in December, and $936,000 in January Freddie's sales are 25% cash and 75% credit. The company's collection history indicates that credit sales are collected as follows: 20% in the month of the sale 70% in the month after the sale 8% two months after the sale 2% are never collected Requirements 1. Prepare a sales budget for all four months, showing the breakdown between cash and credit sales 2. Pronare a cash collection budent for December and January Round answer up to the east dollar

Answer 1

SOLUTION: 1
	PARTICULARS	October	November	December	January
	Cash Sales (25%)	$         2,22,500	$           2,39,000	$           2,67,500	$            2,34,000
	Credit Sales (75%)	$         6,67,500	$           7,17,000	$           8,02,500	$            7,02,000
	Total Sales	$         8,90,000	$           9,56,000	$         10,70,000	$            9,36,000
WORKING NOTES FOR SOLUTION : 2		October	November	December	January
	Credit Sales	$         6,67,500	$           7,17,000	$           8,02,500	$            7,02,000
	20 % Expected to collect in the same month (A)	$         1,33,500	$           1,43,400	$           1,60,500	$            1,40,400
	70% in the month following the sale (B)		$           4,67,250	$           5,01,900	$            5,61,750
	8 % in Two months after the sales('C)			$               53,400	$                57,360
	Total Cash Collected (A+B+C)			$           7,15,800	$            7,59,510
SOLUTION : 2		December	January
	Cash Sales	$         2,67,500	$           2,34,000
	Collection of Credit Sales
	20% of current month credit sales	$         1,60,500	$           1,40,400
	70% of prior month credit sales	$         5,01,900	$           5,61,750
	8% of Credit Sales two month ago	$            53,400	$               57,360
	Total Cash Collection	$         9,83,300	$           9,93,510