Question

Memphis Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from credit sales during the month of May.

Answer 1

$\text{Cash received=\text{Credit sales of May}\times\text{Receivable in currect month}}\\= \ 675,000\times 30\%\\=\ 202,500$The total cash received from the credit sales during the month of May is $592,500.

Further Explanation:

Sales budget:

Sales budget is the estimated sales for the budgeted period. It is prepared by studying the prior year’s sales and then adds the estimated addition based on the business conditions. Sales budget is prepared to plan the revenue measures. It includes the number of unit that would be sold in the budgeted period.

Calculate the cash received from credit sales during the month of May:

The cash received from credit sales will include the cash received from the credit sales of current month and cash received from the credit sales of prior month. Only 30% of May’s credit sales will be considered and the 65% of April’s credit sales will be considered for the calculation of the cash received from credit sales during the month of May. Cash sales are 25% of total sales and the remaining are credit sales. So credit sales will be 75%  of the total sales.

Cash received from the credit sales during the month of May:

$\text{Cash received} = \text{Cash received from May sales}+\text{Cash received from April sales}\\=\ 202,500+\ 390,000\\=\ 592,500$

Thus, the total cash received from the credit sales during the month of May is $592,500.

Working note 1:

Total credit sales for the month of May:

$\text{Credit sales of May}=\text{Total Sales}\times\text{Credit sales\%}\\=\ 900,000\times75\% \\=\ 675,000$

The total credit sales for the month of May are $675,000.

Working note 2:

Cash received from the credit sales of May:

$\text{Cash received}=\text{Credit sales of May}\times\text{Receivable in currect month}\\= \ 675,000}\times 30\%\\ = 202,500$

The total cash received from the credit sales of May is $202,500.

Working note 3:

Total credit sales for the month of April:

$\text{Credit sales of April}=\text{Total Sales}\times\text{Credit sales\% }\\=\ 800,000}}\times 75\%\\=\ 600,000$

The total credit sales for the month of May are $600,000.

Working note 4:

Cash received from the credit sales of April:

$\text{Cash received}=\text{Credit sales of April}\times\text{Receivable in current month}\\=\ 600,000}}\times 65\%\\=\ 390,000$

Learn more:

1.  Learn more about the percentage of sales method brainly.com/question/12960656

2.  Learn more about the allocation cost brainly.com/question/12960164

3.  Learn more about the average cost per unit brainly.com/question/4974216

Answer details:

Grade: Senior School

Subject: Cost accounting

Chapter: Budgeting

Keywords: Budgeting, Cost accounting, Accounting, Cash sales, Credit sales, Cost allocation, Cash received from sales, Cash received from credit sales, Sales budget, Sales forecast, Revenue forecast, Revenue budget, Memphis Company, Total sales, April, May, and June.