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The following figures have been taken from the budget of a company called Herts & Ford International Services Ltd, in the retail trade for the year ended 31 December 2021 January February March April Sales (units) 10,000 11,000 12,000 10,000 The following information is available: (i) The selling price per unit is E9 It will increase to £9.50 per unit from April and in subsequent months. 25% of budgeted sales revenue is expected to be received in the month of sale. 70% of budgeted sales in the following month, while 5% of budgeted sales are expected to result in bad debts. (ii) The budgeted number of units in inventory at the end of each month is equal to the budgeted sales for the following month. (iii) The business is seasonal, and, as indicated in the above budget.results in April are expected to be similar to those in January. There is a three-month cycle, so the results in May and June are expected to be similar to those in February and March respectively. Select the correct answer from the drop down list. What is the total amount of cash collected in the month January? E99,200

Question

The following figures have been taken from the budget of a company called Herts & Ford International
Services Ltd, in the retail trade for the year ended 31 December 2021
January February March	April
Sales (units)	10,000 11,000	12,000 10,000
The following information is available:
(i) The selling price per unit is E9 It will increase to £9.50 per unit from April and in subsequent months.
25%  of budgeted sales revenue is expected to be received in the month of sale. 70%  of budgeted sales in
the following month, while 5%  of budgeted sales are expected to result in bad debts.
(ii) The budgeted number of units in inventory at the end of each month is equal to the budgeted sales for
the following month.
(iii) The business is seasonal, and, as indicated in the above budget.results in April are expected to be
similar to those in January. There is a three-month cycle, so the results in May and June are expected to
be similar to those in February and March respectively.
Select the correct answer from the drop down list.
What is the total amount of cash collected in the month January?
E99,200

The following figures have been taken from the budget of a company called Herts & Ford International Services Ltd, in the retail trade for the year ended 31 December 2021 January February March April Sales (units) 10,000 11,000 12,000 10,000 The following information is available: (i) The selling price per unit is E9 It will increase to £9.50 per unit from April and in subsequent months. 25% of budgeted sales revenue is expected to be received in the month of sale. 70% of budgeted sales in the following month, while 5% of budgeted sales are expected to result in bad debts. (ii) The budgeted number of units in inventory at the end of each month is equal to the budgeted sales for the following month. (iii) The business is seasonal, and, as indicated in the above budget.results in April are expected to be similar to those in January. There is a three-month cycle, so the results in May and June are expected to be similar to those in February and March respectively. Select the correct answer from the drop down list. What is the total amount of cash collected in the month January? E99,200

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ChesterMaster · Tutor for 5 years

Answer

The total amount of cash collected in January is £ 22,500.

Explain

## Step1:<br />Firstly, you should clarify how much the realized revenue of sale from each month will be collected in January. According to the scenario: <br />- 25% of sales is collected in the month of sale ;<br />- 70% of sales will be collected in the next month right after the sale ;<br />- 5% of sales turn to bad debts.<br /><br />## Step2:<br />Using the percentages provided, the total cash collected in the month of January can be calculated. It’s consist of the collected cash from January’s sell within the same month.<br /><br />- Revenue from January sales collected in January: Sales x selling price x rate of collection within its month<br />- In this case: Sales within January is 10,000 units. Selling price is £9 per unit. Rate drew from January is 25%. Calculate following above formula:<br /> <br />### \(CollectionFromJanInJan = SaleVol in Jan * UnitPrice * Collection rateInJan = 10,000 units * £9 per unit * 25% = £ 22,500\)
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