Question

8. VTech average collection period is 15 days. The vice-president of marketing has projected credit sales of $2. million for October, $2.5 million for November and $3 million for December. Assume that all months have 30 days, the cash collections for November and December are: A) $2,000,000 and $2,500,000 respectively. B) $2,500,000 and $2,750,000 respectively C) $2,850,000 and $2,500,000 respectively D) $2,250,000 and $2,750,000 respectively. 9. MousePad average collection period is 15 days. The vice-president of marketing has projected credit sales of $2. million for October, $2.5 million for November and $3 million for December. Purchases equal 60% of sales and are made one month in advance of budgeted sales. Payments are made 1 month after the date of purchase. The payments for purchases for the months of November and December are: A) $1,850,000 and $1,500,000 respectively B) $1,800,000 and $3,000,000 respectively $1,500,000 and $1,800,000 respectively D) $2,250,000 and $2,750,000 respectively.

Answer 1

Sales 15 days Sales oct nov dec $ 20,00,000 $ 25,00,000 $ 30,00,000 2000000*15/30 2500000*15/30 3000000*15/30 $ 10,00,000 $ 12,50,000 $ 15,00,000 Cash Collections in November = 15 days October Sales + 15 days November Sales 1000000+1250000 $ 22,50,000 Cash Collections in December = 15 days November Sales + 15 days December Sales 1250000+1500000 $ 27,50,000 Option D