credit control practice assessment, task 2 g- help
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kthopkins
Registered Posts: 2
i'm really stuck on how you work out the answer to task 2 (g) .
Current turnover is £600,000 pm and currently customers pay 60 days after the month end. the company is introducing a 2% discount for month 3 if customer pay within the current month. it is expected that 80% of the current customers will take advantage of the discount.the sales revenue per month is shown below.
month1 600,000
month2 600,000
month3 600,000
cash receipts in month 3 will be ..... (and =1,070,400)
i can not get this answer and its driving me crazy.
help please
Current turnover is £600,000 pm and currently customers pay 60 days after the month end. the company is introducing a 2% discount for month 3 if customer pay within the current month. it is expected that 80% of the current customers will take advantage of the discount.the sales revenue per month is shown below.
month1 600,000
month2 600,000
month3 600,000
cash receipts in month 3 will be ..... (and =1,070,400)
i can not get this answer and its driving me crazy.
help please
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I'm very tired (trying to understand absorption) and only level three but this is similar to cash management which I have just finished so I think this is right, if you meant £1,070,400 is the correct answer.
The receipts in month 3 will be the £600k from month 1 plus 80% of the month 3 turnover, minus the 2% discount.
Month 3
£600,000/100 x 80 = £480,000 (80% of sales)
£480,000/100 x 2 = £9600 (2% discount)
£480,000 - £9600 = £470,400 (receipts in month 3 from sales made in month 3)
Plus month 1 sales using the old 60 day payment schedule
£470,000 + £600,000 = £1,070,400.0 -
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Thank you so much, that really helped.0
