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    Separating Variable & Fixed Cost, Estimating Cash Collection

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    1. Falstags Brewery has estimated $63,375, $68,625, and $73,875 budgeted costs for the manufacture of 3,500, 4,500, and 5,500 gallons of beer, respectively, next quarter.

    What are the variable and fixed manufacturing costs in the flexible budget for Falstags Brewery?

    2. Sales on account for the first two months of the current year are budgeted as follows:

    Jan. $700,000
    Feb. $750,000

    All sales are made on terms of 2/10, n/30 (2% discount if paid in 10 days, full amount by 30 days); collections on accounts receivable are typically made as follows:

    Collections within the month of sale:
    Within discount period 60%
    After discount period 15%
    Collections within the month following sale:
    Within discount period 15%
    After discount period 7%
    Returns, allowances, and uncollectibles: 3%
    Total 100 %

    Compute the estimated cash collections on accounts receivable for the month of February.

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    Solution Summary

    The solution contains detailed explanation of two distinct problems, each in a separate sheet in attached file. The problems are used as an example to explain the related concepts.

    First one pertains to segregating Fixed and Variable cost when estimated cost for various levels of production is provided. Along with detailed explanation of underling concept, two separate methods of calculating the solution are provided.

    Second one relates to estimating the amount of Cash Collection when various parameters are given. Detailed explanation of each concepts concerning each parameter is provided in the solution.