Backbone Medical Supply Company sells its products on a "cash and carry" basis as well as on a credit basis. To encourage cash sales, the company offers a 4% cash discount. Approximately 65% of each month's sales are for cash. Of the credit sales: (1) 18% are collected in the month of sale and receive a 1% early payment discount; (2) 42% are collected in the month following sale; and (3) 38% are collected in the second month following sale. The remainder of each month's credit sales is expected to be uncollectible.

Projected sales for the 4^th quarter of 20xx are:

October $680,000

November $725,000

December $643,000

A. Determine the total budgeted cash collections for December. (Hint: to get the correct answer , you must calculate the following individual components: (1) the budgeted cash collections in December from "cash and carry" sales, being certain to factor in the cash discount; (2) the dollar amount of December's credit sales that will be collected in December, being certain to base your calculations on the amount of credit sales, rather than total sales, and to allow for the early payment discount; (3) the dollar amount of November's credit sales that will be collected in December; and (4) the dollar amount of October's credit sales that will be collected in December.) Show your work clearly.

B. What percentage of each month's credit sales are expected to be uncollectible? Show your calculations. (Think about what this would imply for budgeted bad debts expense for the quarter.)

Answer rating: 100% (QA)

Answer Lets break down the calculations for each component A Total Budgeted Cash Collections for Dec... View the full answer