Question

Budgets - Question 1 Franklin Corp. sells glass vases to various florists throughout the country. Each vase sells for 5.50. The following sales forecast (in units) has been prepared for the first six months of 2009: January 3000 February 6000 March 5000 April 3000 May 5000 June 2000 Historically, the cash collection of sales has been as follows: 60 per cent in the month of sale, 35 per cent in the month following sale, and 4 per cent in the second month following sale. The remaining 1 per cent is uncollectible. Required: Prepare a cash receipts budget for the second quarter of 2009 (April through June).

Answer 1

Units Months January February March 3000 6000 5000 3000 5000 2000 Rate $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 Amount $1,500 $3,000 $2,500 $1,500 $2,500 $1,000 April May June Franklin Corp Cash Receipt Budget Foe the secound quarter 2009 May | $1,500 $2,500 April June $1,000 Quarter $5,000 Particulars Sales Collection: Feb Month Collection $120 Mar Month Collection $975 $120 [$3000 x 4%] $875 [$2500 x 35%] $900 ($1500 x 60%] Apr Month Collection $1,485 $100 ($2500 x 4%] $525 ($1500 x 35%] $1,500 ($2500 x 60%] May Month Collection $2,375 $60 ($1500 x 4%] $875 [$2500 x 35%] $600 ($ 1000 x 60%] $1,535 June Month Collection $600 Expected Collection $1,895 $2,125 $5,555 April May $2,125 June $1,535 Quarter $5,555 Total Cash Collection $1,895