Downstairs Company has the following sales budget for the last six months of 201

Question

Downstairs Company has the following sales budget for the last six months of 2010:

July                         $100,000

August                       80,000

September                 110,000

October                       80,000

November                 100,000

December                   94,000

Historically, the cash collection of sales has been as follows:

65% of sales collected in month of sale

25% of sales collected in month following sale

8% of sales collected in second month following sale

2% of sales uncollectible

What are the expected cash collections of sales in October?

A) $79,500

B) $85,900

C) $92,400

D) $99,500

Explanation / Answer

Expected cash collections of sales in October=(80000*8%)+(110000*25%)+(80000*65%)= $85900 Option B is correct

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