Multiple Choice Question 104 Sheffield Corp. estimates its sales at 270000 units in the first quarter and that sales will increase by 11000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $25. 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

Given that 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, it means that cash collection for third quarter per budget will comprise;

40% sales for the 3rd quarter

70% of 60% sales in the 3rd quarter and
30% of 60% sales in the 2nd quarter

Furthermore, if estimated sales for first quarter is 270000 units and sales will increase by 11000 units each quarter over the year then,

2nd quarter sales

= 270,000 + 11,000

= 281,000 units

3rd quarter sales

= 281,000 + 11,000

= 292,000 units

and Each unit sells for $25

Hence , Cash collections for the third quarter are budgeted

= $25 * 40% * 292,000 + $25 * 70% * 60% * 292,000 + $25 * 30% * 60% * 281000

= $2,920,000 + $3,066,000 + $1,264,500

= $7,250,500