Seventy percent of Pitkin Corporation's sales are collected in the month of sale, 20% in the month following sale, and 10% in the second month following sale. The following are budgeted sales data for the company: Total budgeted cash collections in April would be:

Question

Seventy percent of Pitkin Corporation's sales are collected in the month of sale, 20% in the month following sale, and 10% in the second month following sale. The following are budgeted sales data for the company:  Total budgeted cash collections in April would be:

Quizplus · Accepted Answer

To calculate the total budgeted cash collections in April, we need to determine how much of the sales from January, February, and March will be collected in April.

- For January sales, 70% would be collected in January, and 20% would be collected in February, leaving 10% to be collected in March. 
- For February sales, 70% would be collected in February, 20% would be collected in March, and 10% would be collected in April. 
- For March sales, 70% would be collected in March, 20% would be collected in April, and 10% would be collected in May.

Using this information, we can calculate the total budgeted cash collections in April as follows:

January sales collected in April: $200,000 x 10% = $20,000 
February sales collected in April: $300,000 x 10% = $30,000 
March sales collected in April: $250,000 x 20% = $50,000

Total budgeted cash collections in April: $20,000 + $30,000 + $50,000 = $100,000

However, we also need to add in the 10% of April sales that are expected to be collected in April:

April sales: $400,000 x 70% = $280,000

Collections from April sales in April: $280,000 x 70% = $196,000

Adding this to the previous total, we get:

Total budgeted cash collections in April: $100,000 + $196,000 = $296,000

However, we need to remember that 10% of March sales are also expected to be collected in April, so we need to subtract this amount:

March sales collected in April: $250,000 x 10% = $25,000

Final answer: $296,000 - $25,000 = $271,000

Therefore, the best choice is B.

Seventy Percent of Pitkin Corporation's Sales Are Collected in the Month