Question

Natcher Corporation collects 35​% of a​ month's sales in the month of​ sale, 40​% in the month following​ sale, and 20​% in the second month following sale. The company has found that​ 5% of their sales are uncollectible. Budgeted sales for the upcoming four months​ are:
August budgeted sales $250,000
September budgeted sales $350,000
October budgeted sales $390,000
November budgeted sales $230,000

The amount of cash that will be collected in November is budgeted to be
I. $218,500
II. $138,000
III. $272,500
IV. $338,500
V. None of the above

Answer 1

Answer: Option (v) is correct

Explanation:

Given that,

Natcher Corporation collects,

35​% of a​ month's sales in the month of​ sale

40​% in the month following​ sale

20​% in the second month following sale

5% of their sales are noncollectable

Budgeted sales are:

August budgeted sales = $250,000

September budgeted sales = $350,000

October budgeted sales = $390,000

November budgeted sales = $230,000

Amount of cash collected in November is budgeted:

= 35% of November sale + 40% of October sale + 20% of September sale

= 35% of $230,000 + 40% of $390,000 + 20% of $350,000

= $80,500 + $156,000 + $70,000

= $306,500