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# Burnt Amber Corp: calculations in accounts receivable and cash collections

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Given the following information, calculate the firm's annual cost of resources in accounts receivable:

ACP = 20.2 days
Annual Sales = \$450,000
Variable cost ratio of 49%
Required return = 12%

a. \$1,464
b. \$12,395
c. \$5,835
d. \$8,236
e. \$3,183

Burnt Amber Corp. (BAC) forecasts monthly sales as follows:
Month Sales (in millions)
April \$12.4
May \$13.5
June \$13.0
July \$14.2

99% of receivables are collected, with 1% written off as bad debts. BAC's historical collection pattern, which is expected to continue in the future, is to collect 15% of sales in the month of sale, 66% in the month following the sale, and 18% in the second month following the sale. What is a predicted amount for the total dollar collections in June?

a. \$12.40 million
b. \$12.87 million
c. \$13.09 million
d. \$13.11 million
e. \$13.16 million

#### Solution Preview

Question 12
&&& Given the following information, calculate the firm's annual cost of resources in accounts receivable:

ACP = 20.2 days
Annual Sales = \$450,000
Variable cost ratio of 49%
Required return = 12%
Account receivables= sales*20.2 days/365 days ...

#### Solution Summary

Calculate Burnt Amber Corporation's annual cost of resources in accounts receivable and then forecast monthly sales in order to determine cash collections for June. The responses show all the calculations necessary including the solution.

\$2.19