REF Outfitters offers a 3% discount to customers who pay cash at the time of sal
ID: 2427689 • Letter: R
Question
REF Outfitters offers a 3% discount to customers who pay cash at the time of sale and a 2% discount to customers who pay within the first 10 days of the month after sale. Past experience shows that cash collections from customers tend to occur in the following pattern: Cash collected at time of sale 55% Collected within cash discount period in first 10 days of month after sale 15% Collected after cash discount period in first month after month of sale 10% Collected after cash discount period in second month after month of sale 15% Never collected 5% Compute the total cash budgeted to be collected in March if sales forecasts are $370,000 for January, $420,000 for February, and $460,000 for March.Explanation / Answer
Cash payment - $460,000*55%*97% = $245,410
Collected after 10 days of sales - $460,000*15%*98% = $67,620
Collected after 1 month of sale - $420,000*10% = $42,000
Collected after 2 month of sale - $370,000*15% = $55,500
Total cash for March = $410,530
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