Question

Scare-2-B-U (S2BU) specializes in costumes for all occasions. The average price of each of its costumes is $310. For each occasion, S2BU receives a 20 percent deposit two months before the occasion, 50 percent the month before, and the remainder on the day the costume is delivered. Based on information at hand, managers at S2BU expect to make costumes for the following number of occasions during the coming months.

April 40
May 35
June 20
July 30
August 55
September 120
Required:
(a) What are the expected revenues for S2BU for each month, April through September? Revenues are recorded in the month of the occasion.
(b) What are the expected cash receipts for each month, April through July?

Answer 1

Scare-2-B-U (S2BU)

a) The expected revenues for each month:

Month Number of Occasions Expected Revenue

April 40 $12,400

May 35 10,850

June 20 6,200

July 30 9,300

August 55 17,050

September 120 37,200

Total 300 $93,000

b) The expected cash receipts:

April May June July

Expected revenue $12,400 $10,850 $6,200 $9,300

20% 2 months $1,240 $1,860 $3,410 $7,440

50% 1 month 5,425 3,100 4,650 8,525

30% delivery date 3,720 3,255 1,860 2,790

Cash receipts $10,385 $8,215 $9,920 $18,755

Step-by-step explanation:

a) Data and Calculations:

Average selling price for each costume = $310

Cash Collections:

20% 2 months before delivery

50% 1 month before delivery

30% on the delivery date

Month Number of Occasions Expected Revenue

April 40 $12,400

May 35 10,850

June 20 6,200

July 30 9,300

August 55 17,050

September 120 37,200

Total 300 $93,000

April May June July August Sept.

Expected revenue $12,400 $10,850 $6,200 $9,300 $17,050 $37,200

20% 2 months $1,240 $1,860 $3,410 $7,440

50% 1 month 5,425 3,100 4,650 8,525 $18,600

30% delivery date 3,720 3,255 1,860 2,790 5,115 $11,160

Cash receipts $10,385 $8,215 $9,920 $18,755