Baldric makes 60% of his sales on credit with the remainder made for cash.In respect of credit sales in any given month he expects to receive 50% in the next month following, 30% in the month after that and 20% in the month after that. Budget data relating to Baldric's sales for the early part of the 20X6 financial year are as follows:
Baldric is currently preparing his cash flow forecast for May.How much should he include as forecast credit sales receipts for that month?

Question

Baldric makes 60% of his sales on credit with the remainder made for cash.In respect of credit sales in any given month he expects to receive 50% in the next month following, 30% in the month after that and 20% in the month after that. Budget data relating to Baldric's sales for the early part of the 20X6 financial year are as follows:
 Baldric is currently preparing his cash flow forecast for May.How much should he include as forecast credit sales receipts for that month?

Quizplus · Accepted Answer

To calculate the forecast credit sales receipts for May, we need to first calculate the total credit sales for April, May, and June.

Total credit sales = £180,000 x 60% = £108,000

For April credit sales, Baldric expects to receive 50% in May, which is £54,000 x 50% = £27,000. 
For May credit sales, Baldric expects to receive 30%, which is £54,000 x 30% = £16,200. 
For June credit sales, Baldric expects to receive 20%, which is £54,000 x 20% = £10,800.

Therefore, the total expected credit sales receipts for May is £27,000 + £16,200 + £10,800 = £54,000.

However, the question only asks for the forecast credit sales receipts for May, which is the May credit sales expected to be received in May. Therefore, the answer is £16,200.

So the best choice is: 
Answer: C

Baldric Makes 60% of His Sales on Credit with the Remainder