Candida makes 70% of her sales on credit with the remainder made for cash.In respect of credit sales in any given month she expects to receive 60% in the next month following, 30% in the month after that and 10% in the month after that. Candida has budgeted sales of £15 000 in January 20X4.She expects sales to rise by 1% each month during the rest of 20X4.
She is preparing her cash budget for April 20X4.How much should she include as forecast credit sales receipts for that month (to the nearest £)?

Question

Quizplus · Accepted Answer

Firstly, we need to calculate Candida's sales forecast for April 20X4, taking into account the 1% increase each month:
- January sales: £15,000
- February sales: £15,150
- March sales: £15,301.50
- April sales: £15,454.02

Next, we need to calculate the expected credit sales receipts for each month:
- February receipts: 60% of January sales = 60% x £15,000 = £9,000
- March receipts: 30% of January sales + 60% of February sales = 30% x £15,000 + 60% x £15,150 = £4,500 + £9,090 = £13,590
- April receipts: 10% of January sales + 30% of February sales + 60% of March sales = 10% x £15,000 + 30% x £15,150 + 60% x £15,301.50 = £1,500 + £4,545 + £9,180.90 = £15,225.90

Therefore, Candida should include £10,659 (nearest pound) as forecast credit sales receipts for April 20X4 (option C).

Candida Makes 70% of Her Sales on Credit with the Remainder