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Excuse me lecturer, could you help me to solve these exercise ?
ABC has produced the following sales forecast:January 750000
February 760000
March 770000
April 780000
May 790000
June 800000Currently 20% of customers pay in cash. Of the credit customers ( excluding those who become irrecoverable debts), 60% pay in one month, 30% pay in two months and 10 % in three months. Irrecoverable debts are 2%. This payment pattern is expected to continue.
What are the forecast cash receipts in April ?
Surely whichever book in which you found this question, also provided the answers (if not, then you really should be using a different book 🙂 ). (Unless this is a test question that you have been set, and we are not here to provide answers to tests 🙂 )
Please, in future, say what problem you have with the printed answer and then I will try and help, but do not simply set us full questions to provide answers for!
Of January’s sales, 20% of them will be received in January. Of the remaining 80%, 2% of them are irrecoverable, which leaves 72% left to be received.
Of this 72%, 60% of them (which is 60% x 72% of 750,000) will be received in February; 30% of them (which is 30% x 72% of 750,000) will be received in March; and 10% of them (which is 10% x 72% of 750,000) will be received in April.
The same happens for each following month.So in April, they will receive the following:
From Aprils sales: 20% x 780,000
From March’s sales: 60% x 72% x 770,000
From February’s sales: 30% x 72% x 760,000
and from January’s sales: 10% x 72% x 750,000
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