Avery Manufacturing has the following sales budgets for the fourth quarter. The accounting manager has analyzed cash collections and determined that credit sales are collected 70% in the month of sale, 20% in the month following the sale, and 10% uncollectible.How much cash is Avery expected to collect in November?
A)$865,600
B)$912,180
C)$787,830
D)$693,600

Question

Avery Manufacturing has the following sales budgets for the fourth quarter.  The accounting manager has analyzed cash collections and determined that credit sales are collected 70% in the month of sale, 20% in the month following the sale, and 10% uncollectible.How much cash is Avery expected to collect in November?
A)$865,600 
B)$912,180 
C)$787,830 
D)$693,600

Quizplus · Accepted Answer

To calculate cash collections for November, we need to look at credit sales for September and October. According to the sales budget, credit sales for September are $1,200,000 and credit sales for October are $1,350,000, for a total of $2,550,000. 70% of that amount is expected to be collected in November, which comes to $1,785,000. However, 10% of the credit sales are uncollectible which reduces the amount to $1,606,500. Then, 20% of the credit sales are collected in the month following the sale, therefore, $255,750 should be collected in December. This leaves us with $1,350,750. Therefore, the answer is B.

Avery Manufacturing Has the Following Sales Budgets for the Fourth