Figure 8-5 The following forecasted sales pertain to Spyware Corporation:
Collection pattern:
65 percent in month of sale
35 percent in month following sale
Spyware Corporation has a selling price of $2.50 per unit and expects to maintain ending inventories equal to 25 percent of the next month's sales.
Refer to Figure 8-5. How many dollars are expected to be collected in September?
A) $7,000
B) $40,000
C) $33,000
D) $21,000

Question

Figure 8-5 The following forecasted sales pertain to Spyware Corporation:
 Collection pattern:
65 percent in month of sale
35 percent in month following sale
 Spyware Corporation has a selling price of $2.50 per unit and expects to maintain ending inventories equal to 25 percent of the next month's sales.
Refer to Figure 8-5. How many dollars are expected to be collected in September?
A) $7,000 
B) $40,000 
C) $33,000 
D) $21,000

Quizplus · Accepted Answer

To calculate the expected sales for September, we need to look at the forecasted sales for August and September:

August Sales = $120,000 x 65% = $78,000 
September Sales = $120,000 x 35% = $42,000

To calculate the expected sales for October, we need to look at the forecasted sales for September and October:

September Sales = $42,000 x 65% = $27,300 
October Sales = $42,000 x 35% = $14,700

To calculate the expected sales for November, we need to look at the forecasted sales for October and November:

October Sales = $14,700 x 65% = $9,555 
November Sales = $14,700 x 35% = $5,145

Now, we can calculate the expected collections for September using the given information:

September Collections = September Sales x Selling Price x Percent Collected 
= $42,000 x $2.50 x 65% 
= $33,000

Therefore, the answer is C.

Figure 8-5 the Following Forecasted Sales Pertain to Spyware Corporation