Question

ABC Company collects sales as follows: 30 percent in the month of sale, 60 percent in the next month, and 8 percent in the second month after the sale; 2 percent is uncollectable. Budgeted sales are as follows: March = $22,000; April = $19,000; May = $23,000. Budgeted cash collections for May are $ __________

Answer 1

To calculate the budgeted cash collections for May, we consider 30% of May sales, 60% of April sales, and 8% of March sales. The total budgeted cash collections for May are $20,060, based on sales data and the company's collection pattern.

Step-by-step explanation:

Budgeted Cash Collections Calculation

The question involves calculating budgeted cash collections for ABC Company for the month of May based on given sales figures for March, April, and May, and the company's collection pattern. To compute the total collections for May, we need to consider sales of all three months as per the collection pattern:

• 30% of May sales are collected in May.
• 60% of April sales are collected in May.
• 8% of March sales are collected in May.

So, we calculate as follows:

• May collections from May sales: 30% of $23,000 = $6,900
• May collections from April sales: 60% of $19,000 = $11,400
• May collections from March sales: 8% of $22,000 = $1,760

Adding these up gives us the total budgeted cash collections for May:

$6,900 (May) + $11,400 (April) + $1,760 (March) = $20,060

Note that the 2% uncollectable sales have not been factored into this calculation, as they do not contribute to cash collections.