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The Model Company is to begin operations in April. It has budgeted April sales of $30,000, May sales of $34,000, June sales of $40,000, July sales of $42,000, and August sales of $38,000. Note that 10% of each month's sales is expected to represent cash sales; 75% of the balance is expected to be collected in the month following the sale, 17% the second month, 6% the third month, and the balance is expected to be uncollectible. What is the amount of cash to be collected in the month of July?

Respuesta :

Answer:

$36,906

Explanation:

The file attached shows a table that explains very well the solution to the problem.

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Answer:

$38,022

Explanation:

Given that the cash collection model is such that 10% of each month's sales is expected to represent cash sales; 75% of the balance is expected to be collected in the month following the sale, 17% the second month, 6% the third month, and the balance is expected to be uncollectible, it means that collection for July would include;

  • 10% sales in July
  • 75% of 90% of sales in June
  • 17% of 90% of sales in May
  • 6% of 90% of sales in April

Hence, if It has budgeted April sales of $30,000, May sales of $34,000, June sales of $40,000, July sales of $42,000,

Cash collected in July

= 10% * $42,000 + 75% of 90% * $40,000 + 17% * 90% * $34,000 + 6% * 90% * $30,000

= $4,200 + $27,000 + $5,202  + $1,620

= $38,022

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