Question

Royal Manufacturing estimates its sales at 100,000 units in the first quarter and that sales will increase by 10,000 units each quarter over the year. Company policy requires 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?

Answer 1

$ 4,137,000

Working:

Quarter		1	2	3	4
Sales in units	a	1,00,000	1,10,000	1,20,000	1,30,000
Selling price per unit	b	$ 35	$ 35	$ 35	$ 35
Sales Value	c=a*b	$       35,00,000	$       38,50,000	$       42,00,000	$       45,50,000
Cash sales	d=c*40%	$       14,00,000	$       15,40,000	$       16,80,000	$       18,20,000
Credit Sales	e=c-d	$       21,00,000	$       23,10,000	$       25,20,000	$       27,30,000
Collection of credit sales:
Same quarter-70%	f=e*70%	$       14,70,000	$       16,17,000	$       17,64,000	$       19,11,000
next Quarter -30%	g=e*30%		$          6,30,000	$          6,93,000	$          7,56,000
Total Cash collection	d+f+g	$       28,70,000	$       37,87,000	$       41,37,000	$       44,87,000