Shadee Corp. expects to sell 510 sun visors in May and 300 in June. Each visor s
ID: 2617072 • Letter: S
Question
Shadee Corp. expects to sell 510 sun visors in May and 300 in June. Each visor sells for $14. Shadee’s beginning and ending finished goods inventories for May are 65 and 55 units, respectively.
Ending finished goods inventory for June will be 50 units. It expects the following unit sales for the third quarter:
July 545
August 500
September 450
Sixty percent of Shadee’s sales are cash.
Of the credit sales, 52 percent is collected in the month of the sale, 36 percent is collected during the following month, and 12 percent is never collected. Required:
Calculate Shadee’s total cash receipts for August and September.
Explanation / Answer
actual number of goods sold = expected sale + opening inventory - closing inventory
= 510+ 65-55
=520 units
Total sales = 520*$14 = $7,280
Out of the above,
cash sales = $7,280*60% = 4,368
52% credit sales collected in the month of sale = ($7,280*40%)*52% = $1,514
Therefore, total cash held in the month of may = $4,368+ $1,514 = $5,880
In the month of June, actual number of goods sold = 545+55-50 = 550
Total Sales = $14*550 = $7,700
Cash sales +52% Credit sales of current month+ 36% credit sale of previous month = $7,700*60%+$1,602+$1048
= $7,270
In the month of July, actual number of goods sold = 545+50 = 595
Total Sales = $14*595= $8,330
Cash sales +52% Credit sales of current month+ 36% credit sale of previous month =4,998+1,733+368 = $7,099
In the month of August, actual number of goods sold = 500
Total Sales = $14*500= $7,000
Cash sales +52% Credit sales of current month+ 36% credit sale of previous month =4,200+1,456+1200= $6,856
In the month of September, actual number of goods sold = 450
Total Sales = $14*450= $6,300
Cash sales +52% Credit sales of current month+ 36% credit sale of previous month =3780+1310+1008 = $6,098.
Therefore, total Cash receipts i) August - $6,856
ii)September - $ 6,098
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