DD Manufacturing is preparing its budget for next year. Sales are all on credit. The company expects that customers will pay 20% of what is owed in the month sales are made, 45% in the month after sales are made and 35% two months after sales are made. The sales budget shows budgeted sales of £180,000 in January 2020, £160,000 in February 2020 and £200,000 in March 2020. What cash receipts from sales should DD Manufacturing allocate to the cash budget for March 2020?

Question

Quizplus · Accepted Answer

In March, DD Manufacturing will receive 20% of March sales (£200,000 * 20% = £40,000), 45% of February sales (£160,000 * 45% = £72,000), and 35% of January sales (£180,000 * 35% = £63,000). Total cash receipts for March = £40,000 + £72,000 + £63,000 = £175,000.

DD Manufacturing Is Preparing Its Budget for Next Year