Crew Clothing (CC) sells women’s resort casual clothing to high-end department s

Question

Crew Clothing (CC) sells women’s resort casual clothing to high-end department stores and in its own retail boutiques. CC expects sales for January, February, and March to be $520,000, $580,000, and $600,000, respectively. Twenty percent of CC’s sales are cash, with the remainder collected evenly over two months. During December, CC’s total sales were $830,000. CC is beginning its budget process and has asked for your help in preparing the cash budget.

Compute CC’s expected cash receipts from customers for each month.

Explanation / Answer

January February March Cash received from: December sales $830,000 x 80% x 50% = 332,000 January sales ($520,000 x 20%) + ($520,000 x 80% x 50%) = 312,000 ($520,000 x 80% x 50%) = 208,000 February sales ($580,000 x 20%) + ($580,000 x 80% x 50%) = 348,000 ($580,000 x 80% x 50%) = 232,000 March Sales ($600,000 x 20%) + ($600,000 x 80% x 50%) = 360,000 Total collection $644,000 $556,000 $592,000

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