Question

Shadee Corp. expects to sell 510 sun visors in May and 300 in June. Each visor sells for $14. Shadee’s beginning and ending finished goods inventories for May are 65 and 55 units, respectively.

Ending finished goods inventory for June will be 50 units. It expects the following unit sales for the third quarter:

July 545

August 500

September 450

Sixty percent of Shadee’s sales are cash.

Of the credit sales, 52 percent is collected in the month of the sale, 36 percent is collected during the following month, and 12 percent is never collected. Required:

Calculate Shadee’s total cash receipts for August and September.

Answer 1

actual number of goods sold = expected sale + opening inventory - closing inventory

= 510+ 65-55

=520 units

Total sales = 520*$14 = $7,280

Out of the above,

cash sales = $7,280*60% = 4,368

52% credit sales collected in the month of sale = ($7,280*40%)*52% = $1,514

Therefore, total cash held in the month of may = $4,368+ $1,514 = $5,880

In the month of June, actual number of goods sold = 545+55-50 = 550

Total Sales = $14*550 = $7,700

Cash sales +52% Credit sales of current month+ 36% credit sale of previous month = $7,700*60%+$1,602+$1048

= $7,270

In the month of July, actual number of goods sold = 545+50 = 595

Total Sales = $14*595= $8,330

Cash sales +52% Credit sales of current month+ 36% credit sale of previous month =4,998+1,733+368 = $7,099

In the month of August, actual number of goods sold = 500

Total Sales = $14*500= $7,000

Cash sales +52% Credit sales of current month+ 36% credit sale of previous month =4,200+1,456+1200= $6,856

In the month of September, actual number of goods sold = 450

Total Sales = $14*450= $6,300

Cash sales +52% Credit sales of current month+ 36% credit sale of previous month =3780+1310+1008 = $6,098.

Therefore, total Cash receipts i) August - $6,856

ii)September - $ 6,098