The field company is preparing its cash payments budget. the following item rela

ID: 2551987 • Letter: T

Question

The field company is preparing its cash payments budget. the following item relate to cash payments the company anticipates making during the second quater of the upcoming year.

A. The company pays for 55% of its direct materials puchases in the month of purchase and the remainder of the following month. The company's direct material puchases for March through June are anticipated to be as follows:

March $111,000

April $132,000

May $128,000

June $143,000

B. Direct labor is paid in the month in which it is incurred. Direct labor for each month of the second quarter is budgeted as follows:

April $56,000

May $66,000

June 81,000

C. Manufacturing overhead is estimated to be 150% of direct labor cost each month. this monthly estimate includes $31,000 of depreciation on the plant and equipment. All manufacturing overhead (excluding depreciation) is paid in the month in which it is incurred.

D. Monthly operating expenses for March through June are projected to be as follows:

March $ 76,000

April $86,000

May $88,000

June $91,0000

Monthly operating expenses are paid in the month after thery are incurred. Monthly operating expenses include $12,000 for monthly depreciation on administrative offices and equipment, and $2,800 for bad debt expense.

E. the company plans to pay $8,000 (cash) for the new server in May.

F. The company must make an estimated tax payment of $12,500 on June 15.

Cash payments for direct marerials April May June Quarter 55% of current month purchases 45% of last month's puchases

Explanation / Answer

Solution:

Cash Payments for direct materials

April

May

June

Quarter

55% of current month purchases

$72,600

$70,400

$78,650

45% of last month's purchases

$49,950

$59,400

$57,600

Total Cash payments for direct materials

$122,550

$129,800

$136,250

$388,600

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