Shadee Corp. expects to sell 620 sun visors in May and 440 in June. Each visor s

Question

Shadee Corp. expects to sell 620 sun visors in May and 440 in June. Each visor sells for $13. Shadee’s beginning and ending finished goods inventories for May are 85 and 60 units, respectively. Ending finished goods inventory for June will be 55 units. It expects the following unit sales for the third quarter: July 560 August 460 September 450 Sixty percent of Shadee’s sales are cash. Of the credit sales, 54 percent is collected in the month of the sale, 38 percent is collected during the following month, and 8 percent is never collected. Required: Calculate Shadee’s total cash receipts for August and September.

Explanation / Answer

The following table shows the calculations

So, as per above calculations, the collections for August will be $5,986 and for September will be $ 5,683

Calculations Particulars May June July August September A Sales units                620             440             560             460                 450 B Sales Price per unit                  13                13                13                13                   13 C = A x B Total Sales value            8,060          5,720          7,280          5,980             5,850 D = C x 60% Cash Sales            4,836          3,432          4,368          3,588             3,510 E = C - D Credit Sales            3,224          2,288          2,912          2,392             2,340 F = E x 54% Collection in month of sale            1,741          1,236          1,572          1,292             1,264 G = E of previous month x 38% Collection in following month          1,225             869          1,107                 909 H = D + F + G Total cash receipts            6,577          5,893          6,810          5,986             5,683

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