Shadee Corp. expects to sell 550 sun visors in May and 430 in June. Each visor s

Question

Shadee Corp. expects to sell 550 sun visors in May and 430 in June. Each visor sells for $11. Shadee’s beginning and ending finished goods inventories for May are 80 and 40 units, respectively. Ending finished goods inventory for June will be 70 units.

It expects the following unit sales for the third quarter:      

Sixty percent of Shadee’s sales are cash. Of the credit sales, 52 percent is collected in the month of the sale, 35 percent is collected during the following month, and 13 percent is never collected.

Required:

Calculate Shadee’s total cash receipts for August and September.

Explanation / Answer

Solution: Calculation of cash receipts:

For August: (440*11*60%) + (500*11*40%*35%) + (440*11*40%*52%) = $4,681

For September: (440*11*40%*35%) + (420*11*60%) + (420*11*40%*52%) = $4,411

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