15. A company has budgeted direct materials purchases of $600,000 in July and $960,000 in August....
15. A company has budgeted direct materials purchases of $600,000 in July and $960,000 in August. Past experience indicates that the company pays for 70% of its direct materials purchases in the month of purchase and the remaining 30% in the next month. Wages, equipment purchases, and Selling & Administrative expenses are paid in the month incurred. For August, Wage Expense is budgeted at $300,000, office equipment purchases are budgeted at $144,000, and selling & administrative expenses are budgeted at $96,000.
The budgeted cash disbursements for August are
a. $1,296,000.
b. $852,000.
c. $1,392,000.
d. $1,464,000.
Homework Answers
Answer: c. $1,392,000
Explanation
The budgeted cash disbursements for August = (Direct materials in July x 30%) + (Direct materials in July x 70%) + Wages Expense + Purchase of office equipment + Selling and Administrative Expenses
= ($600,000 x 30%) + ($960,000 x 70%) + $ 300,000 + 144,000 + 96,000
= $ 180,000 + 672,000 + 540,000
= $1,392,000
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