Question

Shadee Corp. expects to sell 620 sun visors in May and 440 in June. Each visor sells for $13. Shadee’s beginning and ending finished goods inventories for May are 85 and 60 units, respectively. Ending finished goods inventory for June will be 55 units. It expects the following unit sales for the third quarter: July 560 August 460 September 450 Sixty percent of Shadee’s sales are cash. Of the credit sales, 54 percent is collected in the month of the sale, 38 percent is collected during the following month, and 8 percent is never collected. Required: Calculate Shadee’s total cash receipts for August and September.

Answer 1

The following table shows the calculations

Calculations	Particulars	May	June	July	August	September
A	Sales units	620	440	560	460	450
B	Sales Price per unit	13	13	13	13	13
C = A x B	Total Sales value	8,060	5,720	7,280	5,980	5,850
D = C x 60%	Cash Sales	4,836	3,432	4,368	3,588	3,510
E = C - D	Credit Sales	3,224	2,288	2,912	2,392	2,340
F = E x 54%	Collection in month of sale	1,741	1,236	1,572	1,292	1,264
G = E of previous month x 38%	Collection in following month		1,225	869	1,107	909
H = D + F + G	Total cash receipts	6,577	5,893	6,810	5,986	5,683

So, as per above calculations, the collections for August will be $5,986 and for September will be $ 5,683