Answer to Question #210986 in Other for Anisha Kumar

Question #210986

Do-Re-Mi Ltd is a retailer of musical instruments and has the following historical collection pattern for its credit sales:

§ 70 per cent collected in the month of sale.

§ 15 per cent collected in the first month after sale.

§ 10 per cent collected in the second month after sale.

§ 4 per cent collected in the third month after sale.

§ 1 per cent uncollectable.

The credit sales have been budgeted for the last seven months of the year, as shown below:


$55 000


60 000


70 000


80 000


90 000


100 000


85 000



1.   Calculate the estimated total cash receipts during October from credit sales

2.   Calculate the estimated total cash receipts during the December quarter from credit sales during the quarter.

Expert's answer

Table 1 - Summary of financial and other operating information

Number of:

Note 1: includes materials, wages/salaries, vehicle and machine costs, etc

Note 2: following inspection by surveyors after work implemented

Note 3: initial survey and site analysis

Note 4: investigation & action on complaints.

Table B

Proposed strategy for Alpha division for year to 30 November 20X9

It is estimated that the budgeted profit requirement of $20m will be achieved as a consequence of the following:

  • The number of orders received and processed will be 11,000 (with average price levels remaining as per 20X8 actual price levels) from an initial total of 15,500 customer enquiries
  • The marketing cost allowance would be reduced to $7.2m
  • The training cost allowance would be reduced to $3m
  • Cost of sales ($) will rise by 10% from the 20X8 actual total to allow for the combined effect of volume and price changes
  • Remedial work on orders will total $10m for material, labour and overhead costs
  • Initial survey and analysis costs on customer enquiries will remain at the 20X8 average cost per enquiry
  • Customer complaint related costs are expected to rise to $0.25m.

Table 2

Staff bonus calculation for the year ended $15November 20X8 using KeyPerformance Indicators (KPI's) based on relative contract factors

(B)* – each KPI score value is positive (+) where the 20X h8 valueshows an improvement over the previous year OR negative (–) where the20X8 value shows poorer performance than in the previous year.

Each KPI score value is the % increase (+) or decrease (–) in 20X8 as appropriate

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