NARRBEGIN: Silly Sally
Silly Sally,Inc.
Silly Sally,Inc.forecasts the following sales levels: January,$420; February,$435; March,$450; and April,$470.Historically,40% of its sales are for cash.Of the remaining sales,80% are collected in one month,15% are collected in the second month,while the rest remain uncollected.November sales were $380 and December sales were $500.(all values $000)
Purchases are made at 60% of the next month's sales forecast,and are paid for in the month of purchase.Other cash outlays are: rent,$10 monthly; wages and salaries,$50 monthly; a tax payment of $30 in March; an interest payment of $15 in March; and a planned purchase of $20 of new fixed assets in January.
-Refer to Silly Sally,Inc.What are forecasted total cash collection for January?

Question

Quizplus · Accepted Answer

To calculate the forecasted cash collections for January, we need to first calculate the total sales for January.

Total sales for January = $420

Of this, 40% is for cash = 0.4 x $420 = $168

The remaining sales will be collected over the next two months as follows:

80% of remaining sales collected in February = 0.8 x 0.6 x $420 = $201.60

15% of remaining sales collected in March = 0.15 x 0.6 x $420 = $37.80

Thus, the total forecasted cash collection for January is:

Cash sales + Cash collected from remaining sales in January = $168 + $273.60 (60% of remaining sales) = $441.60, which is closest to option B: $442.

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