Question

Shadee Corp. expects to sell 570 sun visors in May and 330 in June. Each visor sells for $16. Shadee’s beginning and ending finished goods inventories for May are 85 and 45 units, respectively. Ending finished goods inventory for June will be 65 units.

It expects the following unit sales for the third quarter:

July: 530
August: 450
September: 450

Sixty percent of Shadee’s sales are cash. Of the credit sales, 50 percent is collected in the month of the sale, 37 percent is collected during the following month, and 13 percent is never collected.

Required:

Calculate Shadee’s total cash receipts for August and September. Do not round calculations, round answer to nearest whole number.

Answer 1

WN 1 : Computation of Sales Amount  

Month	July ($)	August ($)	September ($)
Total Sales ( units sold * per unit cost)	(530 * $16) = 8,480	(450* $16) = 7,200	(450* $16) = 7,200
Total cash sales ( Total Sales * 60 %)	(8,480 * 60 %) = 5,088	(7,200 * 60 %) = 4,320	(7,200 * 60 %) = 4,320
Total credit sales (Total Sales * 40 %)	(8,480 * 40 %) = 3,392	(7,200 * 40 %) = 2,880	(7,200 * 40 %) = 2,880

Computation of  total cash receipts for August and September

Particulars	August ($)	September ($)
Cash sales collected for the month	4,320	4,320
Credit sales collected for the month (Total credit sales * 50 %)	2,880 * 50 % = 1,440	2,880 * 50 % = 1,440
Cash collected from privious month sales (Total credit sales of privious month *37 %)	3,392 * 37 % = 1,255.04	2,880 * 37 % = 1,065.60
Total cash receipts for August and September	$7,015.04 or $7,015	$6,825.60 or $6,826