NewGen Computers is preparing its budget for 2011. Sales for the year are budgeted at $1,000,000; 20% are cash sales and 80% are credit sales. The company expects to collect 60% of all credit sales in 2011. Budgeted expenses are $800,000. These expenditures include $25,000 for depreciation and $497,000 for variable manufacturing overhead. Given this information, total cash inflows from sales for 2011 would be:

Question

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Cash sales are 20% of total sales, which would be $200,000 (20% of $1,000,000). Credit sales are 80% of total sales, which would also be $800,000 ($1,000,000 x 80%). The company expects to collect 60% of credit sales, which would be $480,000 ($800,000 x 60%). Therefore, total cash inflows from sales would be $680,000 ($200,000 + $480,000).

NewGen Computers Is Preparing Its Budget for 2011