Grover has forecast sales to be $125,000 in February,$135,000 in March,$150,000 in April,and $140,000 in May.The average cost of goods sold is 70% of sales.All sales are made on credit and sales are collected 60% in the month of sale,and 40% the month following.What are budgeted cash receipts in April?
A)$105,000
B)$141,000
C)$150,000
D)$144,000

Question

Quizplus · Accepted Answer

Step 1: Calculate the total cost of goods sold (COGS) for each month:
- COGS in February = 0.7 x $125,000 = $87,500
- COGS in March = 0.7 x $135,000 = $94,500
- COGS in April = 0.7 x $150,000 = $105,000
- COGS in May = 0.7 x $140,000 = $98,000

Step 2: Calculate the total credit sales and collections for each month:
- February credit sales = $125,000 x 1 = $125,000
- February collections = $125,000 x 0.6 = $75,000
- March credit sales = $135,000 x 1 = $135,000
- March collections = $135,000 x 0.6 = $81,000
- April credit sales = $150,000 x 1 = $150,000
- April collections = ($135,000 x 0.4) + ($150,000 x 0.6) = $81,000 + $90,000 = $171,000
- May credit sales = $140,000 x 1 = $140,000
- May collections = ($150,000 x 0.4) + ($140,000 x 0.6) = $60,000 + $84,000 = $144,000

Step 3: Budgeted cash receipts in April are equal to April collections, which is $171,000.
Therefore, the answer is D) $144,000.

Grover Has Forecast Sales to Be $125,000 in February,$135,000 in March,$150,000