Budgeted sales in Allen Company over the next four months are given below: $$\begin{array} { | l | l | l | l | l | }
\hline & \text { September } & \text { October } & \text { November } & \text { December } \
\hline \text { Budgeted sales } & \$ 100,000 & \$ 160,000 & \$ 180,000 & \$ 120,000 \
\hline
\end{array}$$ Twenty-five percent of the company's sales are for cash and 75% are on credit. Collections for sales on credit follow a stable pattern as follows: 50% of a month's sales are collected in the month of sale, 30% are collected in the month following sale, and 15% are collected in the second month following sale. The remainder are uncollectible. Given these data, cash collections in December should be?

Question

Budgeted sales in Allen Company over the next four months are given below: $$\begin{array} { | l | l | l | l | l | } 
\hline & \text { September } & \text { October } & \text { November } & \text { December } \
\hline \text { Budgeted sales } & \$ 100,000 & \$ 160,000 & \$ 180,000 & \$ 120,000 \
\hline
\end{array}$$ Twenty-five percent of the company's sales are for cash and 75% are on credit. Collections for sales on credit follow a stable pattern as follows: 50% of a month's sales are collected in the month of sale, 30% are collected in the month following sale, and 15% are collected in the second month following sale. The remainder are uncollectible. Given these data, cash collections in December should be?

Quizplus · Accepted Answer

To calculate cash collections in December, consider both cash sales in December and collections from credit sales in previous months. December cash sales are 25% of $120,000 = $30,000. Collections from credit sales include 50% of December's credit sales ($90,000 * 50% = $45,000), 30% of November's credit sales ($135,000 * 30% = $40,500), and 15% of October's credit sales ($120,000 * 15% = $18,000). Adding these amounts gives a total of $133,500.

Budgeted Sales in Allen Company Over the Next Four Months