Question

Budgeted sales are: Month Sales revenue August $15,000 September $15,000 October $14,000 November $13,000 December $20,000 You collect 50% of sales revenue as cash in the month of the sale, 40% in the following month, and 10% two months after the sale. a) Compute budgeted cash inflows for October and November: October = $ November = $ Remember to go backwards in time: e.g., 40% of September revenue is collected in the following month (October). This implies that cash inflows for October include 40% of sales from the previous month (September).

Answer 1

Answer:

The budgeted cash inflows for October and November is $14,500 and $12,300 respectively

Explanation:

The computation of the budgeted cash inflows for October and November is shown below:

For October:

= 50% of sales revenue of October + 40% of sales revenue of September + 10% of August

=  0.5 × $14,000 + 0.40 × $15,000 + 0.10 × $15,000

= $7,000 + $6,000 + $1,500

= $14,500

For November

= 50% of sales revenue of November + 40% of sales revenue of October + 10% of September

=  0.5 × $13,000 + 0.40 × $14,000 + 0.10 × $15,000

= $5,200 + $5,600 + $1,500

= $12,300