Question

The CFO of Pharoah Corp estimates the number of units sold for May and June to be 4300 units and 6600 units respectively. These units will be sold at a price of $30 per unit. The CFO estimates that 40% of sales will be credit sales and 60% of the credit sales will be received in the same month as the sale, with the balance received in the following month. How much cash is expected to be collected in June?

1) $149760
2) $118800
3) $196200
4) $129000

Answer 1

The cash that is expected to be collected in June is 4) $129.000.

Step-by-step explanation:

In June, the cash collected from sales will include cash from credit sales made in June and the cash from credit sales made in May that are collected in June.

Given:

• June unit sales: 6600 units
• Price per unit: $30

Total sales in June:

= 6600 units * $30

= $198,000

40% of sales are on credit:

= $198,000 * 0.4

= $79,200

60% of credit sales are collected in the same month:

= $79,200 * 0.6

= $47,520

Sales from May (units sold in May and collected in June):

May unit sales: 4300 units

May credit sales: 4300 units * $30 = $129,000

Therefore, cash collected in June:

= Cash from June credit sales + Cash from May credit sales collected in June

= $47,520 + $129,000

= $129,520

The correct amount of cash expected to be collected in June is $129,520.

Correct answer: the closest option is $129.000 (Option 4)