The ABC Corporation\'s budgeted monthly sales are $4,000. In the first month, 40

Question

The ABC Corporation's budgeted monthly sales are $4,000. In the first month, 40% of its customers pay and take the 3% discount. The remaining 60% pay in the month following the sale and don't receive a discount. ABC's bad debts are very small and are excluded from this analysis. Purchases for next month's sales are constant each month at $2,000. Other payments for wages, rent, and taxes are constant at $500 per month. Construct a single month's cash budget with the information given. What is the average cash gain or (loss) during a typical month for the ABC Corporation?

Explanation / Answer

Revenue collected each month = 40%*$4,000*.97 + 60%*$4,000 = $3952 Expenses = $2,000 + $500 = $2,500 Cash gain = $3952-$2,500 = $1452

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