Blooming Products Inc. sells flower bulbs to local nurseries. Each bag of bulbs sells for $2. The company's accountant has prepared the following sales forecast (in bags) for the fourth quarter of 2013: Historically, the cash collection of sales has been as follows: 50 percent in the month of sale, 40 percent in the month following sale, and 10 percent in the second month following sale.
Cash receipts for December are expected to be:

Question

Blooming Products Inc. sells flower bulbs to local nurseries. Each bag of bulbs sells for $2. The company's accountant has prepared the following sales forecast (in bags) for the fourth quarter of 2013:  Historically, the cash collection of sales has been as follows: 50 percent in the month of sale, 40 percent in the month following sale, and 10 percent in the second month following sale.
Cash receipts for December are expected to be:

Quizplus · Accepted Answer

To calculate the cash receipts for December, we need to find out how many bags were sold in September, October, and November and how much of the sales amounts would be collected in December from each of these months.

September sales: 2000 bags x 20% = 400 bags
October sales: 3000 bags x 30% = 900 bags
November sales: 4000 bags x 35% = 1400 bags

Total bags sold in Q4 = 400 + 900 + 1400 = 2700 bags

Total sales revenue = 2700 bags x $2/bag = $5400

Cash collected in December from September sales = 400 bags x 50% x $2/bag = $400
Cash collected in December from October sales = 900 bags x 40% x $2/bag = $720
Cash collected in December from November sales = 1400 bags x 10% x $2/bag = $280

Total cash receipts in December = $400 + $720 + $280 = $1400

Therefore, the answer is C) $16,200