Busch Enterprises has budgeted sales for the months of September and October at $120,000 and $150,000,respectively.Monthly sales are 60% credit and 40% cash.Of the credit sales,25% are collected in the month of sale and 75% are collected in the following month.What are the October cash collections from customers?

Question

Quizplus · Accepted Answer

Credit sales for September = $120,000 x 60% = $72,000
Credit sales for October = $150,000 x 60% = $90,000

Collections for September credit sales (25% collected in the same month) = $72,000 x 25% = $18,000
Collections for October credit sales (75% collected in the following month) = $90,000 x 75% = $67,500
Cash sales for September = $120,000 x 40% = $48,000
Cash sales for October = $150,000 x 40% = $60,000

Total cash collections in October = Collections for September credit sales + Collections for October credit sales + Cash sales for September + Cash sales for October
Total cash collections in October = $18,000 + $67,500 + $48,000 + $60,000
Total cash collections in October = $193,500

Therefore, the correct answer is C) $136,500.

Busch Enterprises Has Budgeted Sales for the Months of September