Question

Ivory Inc. has forecast purchases on account to be $310,000 in March, $370,000 in April, $420,000 in May, and $490,000 in June Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What are budgeted cash payments for June? Multiple Choice Ο Ο 5294000 Ο Ο 5460.000 Ο Ο 5343,000 Ο Ο 421000

Answer 1

SOLUTION: 1
	CALCULATION OF PAYMENT FOR THE MONTH OF JUNE
		March	April	May	June
		Units	Units	Units	Units
	Forcast of Purchase on account	$       3,10,000	$       3,70,000	$        4,20,000	$          4,90,000
	Payment for purchase in same month is 70% (A)	$       2,17,000	$       2,59,000	$        2,94,000	$          3,43,000
	Balance to paid in next month	$           93,000	$       1,11,000	$        1,26,000	$          1,47,000
	Paid in next month (B)		$           93,000	$        1,11,000	$          1,26,000
	Total (A+B)		$       3,52,000	$        4,05,000	$          4,69,000
	Answer = Cash payment for June = Option 2 = $ 469,000
SOLUTION: 2		July	August	September
	Forecasted Sales (Units)	4000	6000	7500
	CALCULATION OF BUDGETED SELLING AND ADMINISTRATIVE EXPENSES
	Fixed Selling expenses	$           15,000
	Add: Variable Cost (7,500 units X $ 5)	$           37,500
	Total	$           52,500
	Answer = Option 2 = $ 52,500