From past experience, the company has learned that 20% of a month’s sales are co

Question

From past experience, the company has learned that 20% of a month’s sales are collected in the month of sale, another 75% are collected in the month following sale, and the remaining 5% are collected in the second month following sale. Bad debts are negligible and can be ignored. May sales totaled $434,000, and June sales totaled $535,000.

Midwest Products is a wholesale distributor of leaf rakes. Thus, peak sales occur in August of each year as shown in the company’s sales budget for the third quarter, given below:

Explanation / Answer

Particulars May June July August September Sale 434000 535000 551000 772000 490000 20% of sale Received in Same Month 86800 107000 110200 154400 98000 75% of sale in the following Month 0 325500 401250 413250 579000 5% of sale in IInd following Month 0 0 21700 26750 27550 86800 432500 533150 594400 704550 Working Notes : May June July August September May Sale 434000 20% Received in may 86800 75% Received in june 325500 5% Received in july 21700 June Sale 535000 20% Received in June 107000 75% Received in july 401250 5% Received in Aug 26750 July Sale 551000 20% Received in July 110200 75% Received in Aug 413250 5% Received in September 27550 August Sale 772000 20% Received in August 154400 75% Received in September 579000 September Sale 490000 20% Received in September 490000

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