Question

Star Company projected unit credit sales for the last four months of the year as shown below:

September 3,000 October 3,200 November 4,100 December 5,600
The company's past records show collection of credit sales as 60% in the month of sale and the balance in the following month. If inventory units are sold for $25, the total cash collections on receivables in November will be_____________

Answer 1

The total cash collections on receivables in November will be 3,740 units.

Step-by-step explanation:

To calculate the total cash collections on receivables in November, we need to determine the amount of credit sales for November and October. Based on the given information, the projected unit credit sales for November is 4,100 units and for October is 3,200 units. The total cash collections in November will be the sum of 60% of the credit sales for November and the remaining balance from the credit sales in October.

60% of the credit sales for November: 4,100 units * 0.6 = 2,460 units

Balance from the credit sales in October = Credit sales in October - 60% of credit sales in October: 3,200 units - (3,200 units * 0.6) = 3,200 units - 1,920 units = 1,280 units

Total cash collections in November = 2,460 units + 1,280 units = 3,740 units.