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amount of cash CS&N needs to have on hand to pay for selling and administrative expense in January?

amount of cash CS&N needs to have on hand to pay for selling and administrative expense in January?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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CS&N Enterprises expects to sell 50,000 units in January and produce 55,000 units. The selling price per unit is $40. All sales are on credit. Customer amounts on account are collected 70% in the month of sale and 25% in the month following and 5% are never collected. Estimated Variable S&A are expected to be $3 per unit sold plus bad debt. Fixed S&A are estimated to be $30,000 of which $4,000 of the $30,000 is depreciation. What is the total amount of cash CS&N needs to have on hand to pay for selling and administrative expense in January?
Transcribed Image Text:CS&N Enterprises expects to sell 50,000 units in January and produce 55,000 units. The selling price per unit is $40. All sales are on credit. Customer amounts on account are collected 70% in the month of sale and 25% in the month following and 5% are never collected. Estimated Variable S&A are expected to be $3 per unit sold plus bad debt. Fixed S&A are estimated to be $30,000 of which $4,000 of the $30,000 is depreciation. What is the total amount of cash CS&N needs to have on hand to pay for selling and administrative expense in January?
Expert Solution
Step 1

Solution

Computation of cash required to pay selling and administrative expense for the month of January is shown below :

 

Step 2

Amount of  cash required to pay selling and administrative expense for the month of January is shown below :

Accounting homework question answer, step 2, image 1

Bad debt expense per unit = Selling price per unit * % not recovered from credit sale 

bad debts expense per unit = $ 40 * 5%

Bad debts expense per unit  = $ 2 per unit 

 

 

thanks 

 

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