Question

Waterway Industries estimates its sales at 240000 units in the first quarter and that sales will increase by 26000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $35. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale. Cash collections for the third quarter are budgeted at:

a. $5,735,800.
b. $11,574,800.
c. $8,380,400.
d. $10,056,200.

Answer 1

d. $10,056,200.

Step-by-step explanation:

The computation of the cash collection for the third quarter is shown below;

Sales in quarter 1 is 240,000 units

Sales in quarter 2 is 240,000 + 26000 units = 266,000 units

And, the sales in quarter 3 is 266,000 units + 24000 units = 292,000 units

Now

= (292,000 units × $35 × 40%) + (292,000 × $35 × 60% × 70%) + (266,000 units × $35 × 60% × 30%)

= $4,088,000 + $4,292,400 + $1,675,800

= $10,056,200