Question

Avril Company makes collections on sales according to the following schedule: 40% in the month of sale 56% in the month following sale 4% in the second month following sale The following sales have been are expected: Expected Sales January $210,000 February $160,000 March $150,000 Budgeted cash collections in March should be budgeted to be:

a. $150,840
b. $149,600
c. $150,000
d. $158,000

Answer 1

d. $158,000

Step-by-step explanation:

Considering the company's cash collection pattern; 40% in the month of sale 56% in the month following sale 4% in the second month following sale, Cash collection in March would be made up of;

• 4% of sales in January
• 56% of sales in February
• 40% of sales in March

As such, Budgeted cash collections in March should be budgeted to be:

= 4% * $210,000 + 56% * $160,000 + 40% * $150,000

= $8400 + $89600 + $60000

= $158,000

Answer 2

Total cash collection= $158,000

Step-by-step explanation:

Giving the following information:

40% in the month of sale

56% in the month following sale

4% in the second month following sale

Sales:

January $210,000

February $160,000

March $150,000

Cash collection:

From March= 150,000*0.4= 60,000

From February= 160,000*0.56= 89,600

From March= 210,000*0.04= 8,400

Total cash collection= $158,000