Use the Information Below to Answer the Following Questions

question 1

Multiple Choice

Use the information below to answer the following questions.
Patiomaster Products manufactures patio furniture. The estimated numbers of sets to be sold in the last three months of 2015 and the first month of 2016 is: Finished goods inventory at the end of September is 2,000 units. Finished goods inventory is set at 20 per cent of next month's sales.
-If a firm had credit sales of $1,250,000 for March and collected its sales as 20% in the month of sale and 80% in the month following the sale, how much of March sales would be collected in cash in March?

• A) $250,000
• B) $1,000,000
• C) $312,500
• D) $1,250,000

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Definitions:

Fixed Costs

Expenses that do not change with the volume of production or sales, such as rent, salaries, and insurance, remaining constant regardless of business activity levels.

Contribution Margin Ratio

A financial metric that shows the percentage of revenue that exceeds variable costs, indicating how much revenue contributes to fixed costs and profits.

Margin of Safety

The difference between actual or expected sales and sales at the break-even point, indicating the cushion against losses.

Sales

The total amount of revenue generated from the selling of goods or services by a company during a specific period.