Chapter 9, Problem 9.51BE

Sales and cash collections budgets (Learning Objectives 2 & 3)

Alexander Reeds, a manufacturer of saxophone, oboe, and clarinet reeds, has projected sales to be $904,000 in October, $960,000 in November, $1,060,000 in December, and $930,000 in January. Alexander’s sales are 30% cash and 70% on credit. The company’s collection history indicates that credit sales are collected as follows:

20% in the month of the sale

65% in the month after the sale

10% two months after the sale

5% are never collected

Requirements

1. 1. Prepare a sales budget for all four months, showing the breakdown between cash and credit sales.
2. 2. Prepare a cash collection budget for December and January. Round all answers up to the nearest dollar.