Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 27

Campbell’s Wholesale Company is preparing monthly cash budgets for the fourth quarter of 2010. Monthly sales revenue in this quarter is estimated as follows: October, $30,000; November, $24,000; and December, $20,000. All sales are made on open credit with 70 percent collected in the month of sale and 30 percent collected in the following month. What is the estimated total cash collected in November? December?

Step 1 of 3

1.

Estimated total cash collection from accounts receivable is shown in the excel calculations as shown below:

The cash receipts can come from sources listed below:

a) Cash Sales.

b) Collection from accounts receivable on account of credit sales.

In the present scenario the breakdown of credit sales both the month of November and December are given below:

a) Credit sales of 70% to be collected in the month of sale.

b) Credit sales of 30% to be collected in the following month of sales.

The following calculations are shown for the month of November:

Deriving the excel cells are shown below: