Question

1. The following information pertains to Hepburn Company:
   

Month	Sales	Purchases
January	$60,000	$35,000
February	$84,000	$42,000
March	$107,000	$66,000

Cash is collected from customers in the following manner:

Month of sale 35%

Month following the sale 65%

50% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.

Labor costs are 25% of sales. Other operating costs are $32,000 per month (including $10,000 of depreciation). Both of these are paid in the month incurred,

The cash balance on March 1 is $10,000. A minimum cash balance of $6,000 is required at the end of the month. Money can be borrowed in multiples of $1,000.

How much cash will be disbursed in total in March?

Answer 1

Payment for purchases in March = 50% of February purchases + 50% of March purchases

= 42,000 x 50% + 66,000 x 50%

= 21,000 + 33,000

= $54,000

Labor cost = 25% of sales

= 107,000 x 25%

= $26,750

Other operating cost =  $32,000 per month

Depreciation per month = $10,000

Cash payment for operating cost = Other operating cost - Depreciation per month

= 32,000 - 10,000

= $22,000

Schedule of Cash disbursement

Cash payment of for purchases	54,000
Cash payment for labor cost	26,750
Cash payment for operating cost	22,000
Total cash disbursement	$102,750

kindly give a positive rating if you are satisfied with the solution. Please ask if you have any query related to the question, Thanks.