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Chapter 22: 9SE (page 1230)

Preparing a financial budget—schedule of cash receipts

Berry expects total sales of \(359,000 in January and \)405,000 in February. Assume that Berry’s sales are collected as follows:

80% in the month of the sale

10% in the month after the sale

6% two months after the sales

4% never collected

November sales totaled \(350,000, and December sales were \)325,000. Prepare a schedule of cash receipts from customers for January and February. Round answers to the nearest dollar.

Short Answer

Expert verified

The total cash receipts from customers are $340,700 and $379,400 for January and February respectively.

Step by step solution

01

Meaning of reciepts

The receipts are the amount that will be received by the company for the services or goods provided.

02

Schedule of cash receipts from customers

Particulars

January

February

Total sales expected

$359,000

$405,000

Cash receipts from customers

Cash received in the month of sales (10%)

$287,200

$324,000

Cash received in the month after sales (10%)

$32,500

$35,900

Cash received two months after sales (6%)

$21,000

$19,500

Total cash receipts from customers

$340,700

$379,400

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Most popular questions from this chapter

Budgeting benefits List the three key benefits companies get from preparing a budget.

Preparing a financial budget—schedule of cash receipts

Victors expects total sales of \(702,000 for January and \)349,000 for February. Assume that Victor'ssales are collected as follows:

50% in the month of the sale

30% in the month after the sale

16% two months after the sale

4% never collected

November sales totaled \(388,000, and December sales were \)407,000. Prepare a schedule of cash receipts from customers for January and February. Round answers to the nearest dollar.

Using sensitivity analysis in budgeting

Refer to the Berry’s schedule of cash receipts from customers that you prepared in Short Exercise S22-9. Now assume that Berry’s sales are collected as follows:

60% in the month of the sale

20% in the month after the sale

18% two months after the sale

2% never collected

Prepare a revised schedule of cash receipts for January and February.

What is sensitivity analysis? Why is it important for managers?

In a manufacturing company, what are the three types of budgets included in the master budget? Describe each type.
See all solutions

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