Question

The budgeted sales for the next four quarters are £192,000, £288,000, £288,000 and £336,000 respectively. It is estimated that sales will be paid for as follows:-75% of the total will be paid in the quarter that the sales were made. Of the balance 50% will be paid in the quarter after the sale was made. The remaining 50% will be paid in the quarter after this. The amount of cash received in the third quarter will be:

Answer 1

Solution :

As per the information given in the question we have

a.75% of the total will be paid in the quarter that the sales were made.

b. Of the balance 50% will be paid in the quarter after the sale was made. This implies ( 25 % * 0.50 ) = 12.5 % will be paid in the quarter after the sale was made.

c. The remaining 50% will be paid in the quarter after this. Thus the balance ( 100 % - 75 % - 12.5 % ) = 12.5 % will be paid in the quarter after this.

We know that quarter wise sales are as follows:

First Quarter = £ 192,000 ;   Second Quarter = £ 288,000   ;   Third Quarter = £ 288,000     ;

Thus from the above information it can be inferred that: the amount of cash received in the third quarter will be:

= 75 % of sales of Third quarter + 12.5 % of sales of Second Quarter + 12.5 % of sales of First Quarter

Applying the available information we have the amount of cash received in the third quarter as follows:

= ( £ 288,000 * 75 % ) + ( £ 288,000 * 12.50 % ) + ( £ 192,000 * 12.50 % )

= £ 216,000 + £ 36,000 + £ 24,000

= £ 276,000

Thus the amount of cash received in the third quarter will be = £ 276,000