Bear inc. Estimates it's sales at 200000 units in the first quarter and that sales will increase by 20000 units each quarter over the year. They have and desire a 25% ending inventory

$8,274,000

Explanation:

We follow the following steps to compute the cash collections.

STEP 1

1. We Compute the second and third-quarter sales units.

Each quarter, the sales units increases by 20,000.

Therefore:

Second quarter sales

= 200000+20000 =220,000

Third quarter sales units

= 220,000 + 20,000

= 240,000

STEP 2

We calculate the value of sales for the second and third quarter:

Each Unit=$35

Second quarter sales value

= 220,000 × $35

= $7,700,000

Third quarter sales value

= 240,000 × $35

= $8,400,000

STEP 3

We compute the cash sales and credit sales as per the given proportion

For the third quarter:

Cash sales = 40% of third quarter sales revenue

= 40% × $8,400,000

= $3,360,000

Since 40% is the cash sales, for a quarter, 60% is the credit sales

Therefore, Credit sales for the third quarter

= 60% × 70% × Third Quarter sales revenue

= 60% × 70% × $8,400,000

= $3,528,000

Also, Credit sales based on the second quarter sales revenue

= 60% × 70% × second quarter sales revenue

= 60% × 30% × $7,700,000

= $1,386,000

Therefore, the Total cash collection for the third quarter

= Cash collection of third quarter + credit sales based on second quarter sales revenue + credit sales based on third quarter sales revenue

=3,360,000+1,386,000 +3,528,000

= $8,274,000

Hence, Cash collections for the third quarter are budgeted at $8,274,000.

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step-by-step explanation:

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