Cicero Manufacturing Inc. sells gloves at local ski resorts during the winter months. Each pair of gloves sells for $15. The following sales forecast (in units) has been prepared for October 2012 through March 2013: Historically, the cash collection of sales has been as follows: 60 percent in the month of sale, 35 percent in the month following sale, and 4 percent in the second month following sale. The remaining 1 percent is uncollectible.
Cash receipts for January are expected to be:

Question

Cicero Manufacturing Inc. sells gloves at local ski resorts during the winter months. Each pair of gloves sells for $15. The following sales forecast (in units) has been prepared for October 2012 through March 2013:  Historically, the cash collection of sales has been as follows: 60 percent in the month of sale, 35 percent in the month following sale, and 4 percent in the second month following sale. The remaining 1 percent is uncollectible.
Cash receipts for January are expected to be:

Quizplus · Accepted Answer

To calculate the cash receipts for January, we need to determine the sales made in October, November, and December 2012.

Sales in October = 7,000
Sales in November = 8,000
Sales in December = 10,000

Total sales for these three months = 7,000 + 8,000 + 10,000 = 25,000

60% of these sales will be collected in January, which gives us: 0.6 x 25,000 = 15,000

35% of these sales will be collected in February, which gives us: 0.35 x 25,000 = 8,750

4% of these sales will be collected in March, which gives us: 0.04 x 25,000 = 1,000

The remaining 1% is uncollectible, which gives us: 0.01 x 25,000 = 250

Therefore, the total cash receipts for January will be: 15,000
+ 8,750 = 23,750

So, the correct answer is D as it is the closest to 23,750.