BC Manufacturing is preparing its budget for next year. 30% of sales are for cash with the remainder on credit. The company expects that credit customers will pay 50% of what is owed one month after the credit sales are made, 30% two months after the credit sales are made and 20% three months after the credit sales are made. The sales budget shows sales of £270,000 in April 2021, £300,000 in May 2021, £320,000 in June 2021 and £340,000 in July 2021. What cash receipts from sales should BC Manufacturing include in its cash budget for July 2021?

Question

Quizplus · Accepted Answer

To calculate cash receipts for July 2021, consider: 30% of July sales (£340,000) = £102,000 (cash sales). For credit sales: 50% of May credit sales (£210,000) = £105,000, 30% of June credit sales (£224,000) = £67,200, and 20% of April credit sales (£189,000) = £37,800. Total cash receipts = £102,000 + £105,000 + £67,200 + £37,800 = £314,800.

BC Manufacturing Is Preparing Its Budget for Next Year