United Insurance Company specializes in term life insurance contracts.Cash collection experience shows that 30 percent of billed premiums are collected in the month before they are due,60 percent are collected in the month they are due,and 6 percent are collected in the month following their due date.Four percent of the billed premiums are collected late (in the second month following their due date).Total billing notices in January were $50,000;in February,$60,000;in March,$66,000;in April,$65,000;in May,$60,000;and in June,$70,000.How much cash does the company expect to collect in May?

Question

Quizplus · Accepted Answer

To calculate the expected cash collection in May, we need to consider the collection percentages for each relevant month leading up to May. For May collections, we include:- 30% of June's billing ($70,000 * 30% = $21,000)- 60% of May's billing ($60,000 * 60% = $36,000)- 6% of April's billing ($65,000 * 6% = $3,900)- 4% of March's billing ($66,000 * 4% = $2,640)Adding these amounts gives us the total expected cash collection in May: $21,000 + $36,000 + $3,900 + $2,640 = $63,540.

United Insurance Company Specializes in Term Life Insurance Contracts