Super Drive is a computer hard drive manufacturer. The company's balance sheet for the fiscal year ended on November 30 appears below:

Additional information regarding Super Drive's operations appear below:
• Sales are budgeted at $520,000 for December and $500,000 for January.
• Collections are expected to be 60% in the month of sale and 40% in the month following sale. There are no bad debts.
• 80% of the disk drive components are purchased in the month prior to the month of the sale, and 20% are purchased in the month of the sale. Purchased components comprise 40% of the cost of goods sold.
• Payment for components purchased is made in the month following the purchase.
• Assume that the cost of goods sold is 80% of sales.

-Expected cash collections in December are:

Question

Super Drive is a computer hard drive manufacturer. The company's balance sheet for the fiscal year ended on November 30 appears below:

Additional information regarding Super Drive's operations appear below:
• Sales are budgeted at $520,000 for December and $500,000 for January.
• Collections are expected to be 60% in the month of sale and 40% in the month following sale. There are no bad debts.
• 80% of the disk drive components are purchased in the month prior to the month of the sale, and 20% are purchased in the month of the sale. Purchased components comprise 40% of the cost of goods sold.
• Payment for components purchased is made in the month following the purchase.
• Assume that the cost of goods sold is 80% of sales.

-Expected cash collections in December are:

Quizplus · Accepted Answer

To find the expected cash collections in December, we need to calculate the portion of November sales that will be collected in December and add it to the December sales that will be collected in that month.

The sales budget for November is $350,000, so 70% of that amount ($245,000) is expected to be collected in November. The remaining 30% ($105,000) will be collected in December.

The sales budget for December is $330,000, of which 70% ($231,000) is expected to be collected in December.

Therefore, the total expected cash collections in December are:

$105,000 (from November sales) + $231,000 (from December sales) = $336,000

However, we need to account for the 4% of sales that will be uncollectible, so the final answer is:

$336,000 - 4% of $330,000 = $322,000

Thus, the best choice is C.

Super Drive Is a Computer Hard Drive Manufacturer