A company began its operations on January 1 of 2020. Sales budget for January, February and March are Php 240,000; Php 300,000; and Php 420,00 respectively. This company expects 20% of sales on cash and the remainder on account. Of the sales on account, 70% is expected in the month of sale, the 25% in the month following the sale, and the remainder in the following month.

How much is the company’s total cash collection for the month of March?

---------

solution 8 points

choice 2 points

Select one:

a. 388,800.00

b. 295,200.00

c. 294,000.00

d. 304,800.00

Total Sales in March = Php 420,000

Cash Sales = 20%

Cash Sales in March = Total Sales * 20% = 420,000 * 20% = 84,000

Credit Sales = 80%

Credit Sales in March = Total Sales * 80% = 420,000 * 80% = 336,000

Percentage of Credit sales collected in same month = 70%

Credit Sales of March collected in same month = 70% * Credit Sales in March

= 70% * 336,000

Credit Sales of March collected in same month = 235,200

February's Total Sales = 300,000

Feb's Credit Sales = 80% * Feb's Total Sales = 80% * 300,000 = 240,000

Percentage of Credit Sales collected in month following the sale = 25%

Feb's Credit Sales collected in March = 25% * Feb's Credit Sales

= 25% * 240,000

Feb's Credit Sales collected in March = 60,000

January's Total Sales = 240,000

Jan's Credit Sales = 80% * Feb's Total Sales = 80% * 240,000 = 192,000

Percentage of Credit Sales collected in month after the following month of sale = 100% - 70% - 25% = 5%

Jan's Credit Sales collected in March = 5% * Jan's Credit Sales

= 5% * 192,000

Jan's Credit Sales collected in March = 9,600

Total Cash Collection in March = March's Cash Sales + March's Credit Sales Collected in same month + Feb's Credit Sales collected in March + Jan's Credit Sales collected in March

Total Cash Collection in March = 84,000 + 235,200 + 60,000 + 9,600

Hence, Total Cash Collection in March = 388,800 which is Option (a) among the given choices.