The following information pertains to the October operating budget for Flockhart
ID: 2398388 • Letter: T
Question
The following information pertains to the October operating budget for Flockhart Corporation . Budgeted sales for October $100,000 and November $200,000 Collections for sales are 60% in the month of sale and 40% the next month. Gross margin is 30% of sales. Administrative costs are $10,000 each month. . Beginning accounts receivable (October 1) $20,000 Beginning inventory (October 1) $14,000 Beginning accounts payable (October 1) 560,000. (All from inventory purchases.) Purchases are paid in full the foliowing month . Desired ending inventory is 20% of next month's cost of goods sold (COGS) . No loans are outstanding on October 1 For October, budgeted cash coliections are O A. $80.000 O B. $80,000 OC. $20 000 0 D. None of the above is correct.Explanation / Answer
Correct answer is option B.80,000
Calculation of Budgeted cash collection for October month
= 60% of October sales + 40% of September sales
40% of september sales is nothing but opening account receivable balance in October,ie $20,000
So answer = 1,00,000*60% +20,000
=$80,000
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