Bear, inc. estimates its sales at 200,000 units in the first quarter and that sales will increase by 20,000 units each quarter over the year. they have, and desire, a 25% ending inventory of finished goods. each unit sells for $35. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. the remainder is received in the quarter following sale. cash collections for the third quarter are budgeted at

The Cash collections for the third quarter are budgeted at $8,274,000

Explanation:

For computing the cash collections, following steps is required which is described below:

1. Compute the second and third-year sales units:

Since in the question, it is said that the sales units are increased by 20,000 for each quarter.

So,

Second quarter sales units = First Quarter sales units + increase units

                                             = 200,000 + 20,000

                                             = 220,000

And, the third quarter sales units = Second quarter sales units + increased units

= 220,000 + 20,000

= 240,000

2. Calculate the sales value of second and third quarter:

Second quarter sales value = Sales units of second quarter × selling price per unit

= 220,000 × $35

= $7,700,000

And, the third quarter sales value = Sales units of third quarter × selling price per unit

= 240,000 × $35

= $8,400,000

3. Compute the cash sales and credit sales as per the given proportion which is mentioned in the question :

For third quarter:

Cash sales = 40% of third quarter sales revenue

                  = 40% × $8,400,000

                  = $3,360,000

Since 40% is the cash sales, so 60% is the credit sales

Therefore, the credit sales based on third quarter sales revenue

= 60% × 70% × third quarter sales revenue

= 60% × 70% × $8,400,000

= $3,528,000

And, the credit sales based on second quarter sales revenue

= 60% × 70% × second quarter sales revenue

= 60% × 30% × $7,700,000

= $1,386,000

So, the total cash collection would be equal to

= Cash collection of third quarter + credit sales based on second quarter sales revenue + credit sales based on third quarter sales revenue

= $3,360,000 + $1,386,000 + $3,528,000

= $8,274,000

Hence, the Cash collections for the third quarter are budgeted at $8,274,000

answer; the above statement is (true);

answersecondary succession;