Answer:
$8,274,000
Explanation:
We follow the following steps to compute the cash collections.
STEP 1
1. We Compute the second and third-quarter sales units.
Each quarter, the sales units increases by 20,000.
Therefore:
Second quarter sales
= 200000+20000 =220,000
Third quarter sales units
= 220,000 + 20,000
= 240,000
STEP 2
We calculate the value of sales for the second and third quarter:
Each Unit=$35
Second quarter sales value
= 220,000 × $35
= $7,700,000
Third quarter sales value
= 240,000 × $35
= $8,400,000
STEP 3
We compute the cash sales and credit sales as per the given proportion
For the third quarter:
Cash sales = 40% of third quarter sales revenue
= 40% × $8,400,000
= $3,360,000
Since 40% is the cash sales, for a quarter, 60% is the credit sales
Therefore, Credit sales for the third quarter
= 60% × 70% × Third Quarter sales revenue
= 60% × 70% × $8,400,000
= $3,528,000
Also, Credit sales based on the second quarter sales revenue
= 60% × 70% × second quarter sales revenue
= 60% × 30% × $7,700,000
= $1,386,000
Therefore, the Total cash collection for the third quarter
= Cash collection of third quarter + credit sales based on second quarter sales revenue + credit sales based on third quarter sales revenue
=3,360,000+1,386,000 +3,528,000
= $8,274,000
Hence, Cash collections for the third quarter are budgeted at $8,274,000.
