Blustery Fans is a manufacturer of oscillating fans. It has budgeted direct mate

Question

Blustery Fans is a manufacturer of oscillating fans. It has budgeted direct materials purchases of $100,000 in March and $160,000 in April. Past experience indicates that Blustery pays for 70% of its purchases in the month of purchase and the remaining 30% in the next month. In addition to di- rect materials, the following items were budgeted for April: Wages expense $50,000 Purchase of office equipment 24,000 Operating expenses (paid as incurred) 16,000 Depreciation expense 12,000

The budgeted cash disbursements for April are a. $216,000. b. $142,000. c. $232,000. d. $244,000.

Explanation / Answer

Answer. C. $232,000 April Payment for Direct Material March - 100,000 X 30%            30,000 April - 160,000 X 70%          112,000 Total Cash paid for Material          142,000 Expenses Paid Wage Expenses            50,000 Operating Expenses            16,000 Total Expenses Paid            66,000 Purchase of Equipment            24,000 Total Cash Disbursements          232,000

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