Hinrich Entertainment distributes a DVD which sells for $12 per unit. Hinrich pa

Question

Hinrich Entertainment distributes a DVD which sells for $12 per unit. Hinrich pays $7 per unit to buy the product. Selling cost of $1 per unit is incurred to deliver the product to the customer. This is paid in cash when the product is sold. Additionally, Hinrich has $50,000 per month in fixed selling and administrative expenses (including $3,000 in depreciation), which are paid half in the month incurred and half in the next month. It is Hinrich's policy to maintain an inventory at the end of each month equal to 30% of the next month's projected cost of sales. Hinrich makes 30% of sales in cash, and the rest are on credit. Credit sales are collected in the month after sale. Budgeted monthly sales in units for the first five months of 2008 are as follows:
January 20,000 units
February 22,000 units
March 26,000 units
April 28,000 units
May 40,000 units


Reference: Ref 10-5


What will total collections be in February?
Answer
$22,000
$79,200
$264,000
$247,200

Explanation / Answer

Colletions in February: 30% of February sales = 22,000*12*0.3 = 79,200 70% of January sales = 20,000*12*0.7 = 168,000 Total = 79,200 + 168,000 = 247,200 Answer: $247,200

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.