Question

Young Co. has budgeted its activity for December according to the following information: 1. Sales at $600,000, all for cash. 2. Budgeted depreciation for December is $15,000. 4. The cash balance at December 1 was $15,000. 5. Selling and administrative expenses are budgeted at $60,000 for December and are paid for in cash. 6. The planned merchandise inventory on December 31 and December 1 is $18,000. 7. The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are paid in cash. How much are the budgeted cash disbursements for December?

Answer 1

The answer is: Total budgeted cash disbursement for December is $510,000.

Step-by-step explanation:

Please find the below for detailed explanation and calculations:

Activities listed in the questions causes cash outflow for Young Co., i.e cash disbursement in December are:

+ Selling and administrative expense: Budgeted at $60,000 and all paid in cash;

+ Merchandise purchase which is all paid in cash: Budgeted sales in December x 75% = 600,000 x 75% = $450,000.

Thus, total projected cash disbursement for December = Selling and administrative expense Merchandise purchase = 450,000 + 60,000 = $510,000.