Question

ABC Company pays for raw material purchases as follows:

75% in the month of purchase; 25% in the subsequent month.
Budgeted purchases are as follows: June = $56,000; July = $60,000.
Budgeted cash payment to be made in the month of July is $ ?

Answer 1

The budgeted cash payment ABC Company must make in July for raw material purchases is $59,000, which is the sum of 25% of June's purchases ($14,000) and 75% of July's purchases ($45,000).

Step-by-step explanation:

The student is asking about the budgeted cash payment ABC Company has to make in the month of July for raw material purchases. The payments are staggered as such: 75% in the month of purchase and 25% in the subsequent month. With budgeted purchases provided for June and July, the cash payment for July includes 75% of July's purchases, plus 25% of June's purchases.

To calculate the total budgeted cash payment for July, simply apply the payment percentages to the respective purchase amounts from June and July:

• June's remaining payment for July: $56,000 x 25% = $14,000
• July's payment in July: $60,000 x 75% = $45,000

Therefore, the total budgeted cash payment for July is the sum of these two amounts:

$14,000 + $45,000 = $59,000.