Question

A company has budgeted direct materials purchases of $150,000 in March and $240,000 in April. Past experience indicates that the company pays for 70% of its purchases in the month of purchase and the remaining 30% in the next month. During April, the following items were budgeted:

Wages Expense= $75,000
Purchase of office equipment= 36,000
Cash Selling and Administrative Expenses= 24,000
Depreciation Expense= 18,000 (not included in S & A expenses)
The budgeted cash disbursements for April are:
a.$213,000.
b.$324,000.
c.$348,000.
d.$366,000.

Answer 1

The calculation of the budgeted cash disbursements for April includes partial payments for both March and April purchases, as well as other budgeted expenses, except for the non-cash depreciation expense. The total budgeted cash disbursements for April amount to $348,000.

Step-by-step explanation:

To calculate the budgeted cash disbursements for April based on the given information, we must consider both the payments for purchases made in April as well as the outstanding payments for purchases made in March.

For March purchases of $150,000:

For April purchases of $240,000:

Other April disbursements:

Note that Depreciation Expense is a non-cash expense so it is not considered in cash disbursements.

Now, adding up all the payments to be made in April:

$45,000 (March leftover) + $168,000 (April purchases) + $75,000 (Wages) + $36,000 (Equipment) + $24,000 (S&A) = $348,000

Therefore, the budgeted cash disbursements for April are $348,000.