Pardee Company makes 30% of its sales for cash and 70% on account. 60% of the account sales are collected in the month of sale, 25% in the month following sale, and 12% in the second month following sale. The remainder is uncollectible. The following information has been gathered for the current year: Month 1 2 3 4 Total sales $78,000 $80,000 $68,000 $48,000 Total cash receipts in Month 4 will be: A. 38,780 B.68,000 C.53,180 D.50,600
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Pardee Company makes 30% of its sales for cash and 70% on account. 60% of the account sales are collected in the month of sale, 25% in the month following sale, and 12% in the second month following sale. The remainder is uncollectible. The following information has been gathered for the current year:
Month 1 2 3 4
Total sales $78,000 $80,000 $68,000 $48,000
Total cash receipts in Month 4 will be:
A. 38,780
B.68,000
C.53,180
D.50,600
- Cash sales 30% + 70% credit sales = 100% sales
- out of the 70 % the collection is made as follows:
- 60% in the month of sale
- 25% in the next month which follows the sale
- 12% in the second month which follows the sales ( that is after leaving the next month)
- 3% remains uncollectible ( that is 100% - 60% - 25% -12% = 3%)
So , for the month 4 - cash sales of 30% will be collected , out of remaining 70% credit sale the cash will be collected as follows:
60% from the month 4 , 25% from month 3 and remaining 12% from month 2 .
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