Question

Using sensitivity analysis in budgeting

Refer to the Berry’s schedule of cash receipts from customers that you prepared in Short Exercise S22-9. Now assume that Berry’s sales are collected as follows:

60% in the month of the sale

20% in the month after the sale

18% two months after the sale

2% never collected

Prepare a revised schedule of cash receipts for January and February.

Short answer

Answer

Total cash receipts from the customers is $572,440 in the month of January and $423,060 in the month of February.

Step-by-step solution

Meaning of schedule of cash receipts

A systematic schedule created to record the money received from a customer is called a cash receipt schedule.

Preparation of schedule of cash receipts

Particulars	January	February
Total budgeted sales	$702,000	$349,000
Cash receipts from customers:
60 % in the month of sale	$421,200	$209,400
20% in the month after sale	$407,000*20% =$81,400	$702,000*20% =$140,400
18% two months after sales	$388,000*18% =$69,840	$407,000*18% =$73,260
Total cash receipts from customers	$572,440	$423,060