Shadee Corp. expects to sell 510 sun visors in May and 390 in June. Each visor s

ID: 2581757 • Letter: S

Question

Shadee Corp. expects to sell 510 sun visors in May and 390 in June. Each visor sells for $18. Shadee's beginning and ending finished goods inventories for May are 85 and 55 units, respectively. Ending finished goods inventory for June will be 55 units. It expects the following unit sales for the third quarter: July August September 530 490 450 Sixty percent of Shadee's sales are cash. Of the credit sales, 50 percent is collected in the month of the sale, 40 percent is collected during the following month, and 10 percent is never collected. Required: Calculate Shadee's total cash receipts for August and September. (Do not round your intermediate calculations. Round your answers to the nearest whole dollar.) August September Total Cash Receipts

Explanation / Answer

Shadee Corp

Determination of the company’s total cash receipts for August and September:

August

September

Cash Sales

$5,292

$4,860

Collections from credit sales

$3,290.40

$3,031.20

Total cash receipts

8,582.40

$7,891.20

Workings –

Cash sales in August -

Total sales in August = $18 x 490 units = $8,820

Cash sales = 60% of total sales = $8,820 x 60%

Cash sales in August = $5,292

Credit sales collected in August –

August credit sales – 50% of credit sales = 50% of 40% of 8,820

= $1,764

40% of credit sales of July in August –

Total sales in July = $18 x 530 = $9,540

Credit sales in July = 40% of $9,540 = $3,816

July credit sales collection in August = 40% of $3,816 = $1,526.40

Total credit sale collections in August = $1,764 + $1,526.40 = $3,290.40

Cash sales in September -

Total sales in September = $18 x 450 = $8,100

Cash sales = $4,860

Credit sales = $3,240

50% credit sales collected in September = 50% of 3,240 = $1,620

40% of credit sales of August in September = 40% of $3,528 = $1,411.20

Total credit sales collections in September = $1,620 + $1,411.2 = $3,031.20