avy Johnson is CFO for a newly formed manufacturing company. Below is the anticipated monthly production for the first six months of operation. Davy is interested in learning which of the first six months will require cash outlays of more than $40,000 toward the purchase of materials. Each unit requires 5 pounds of material at $10 per pound. All material is purchased in the month prior to its expected use. Purchases are paid for 10% in the month of purchase, 40% in the month following the month of purchase, and 50% in the second month following the month of purchase. Compute the total amount paid for February.
QUESTION 44
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Davy Johnson is CFO for a newly formed manufacturing company. Below is the anticipated monthly production for the first six months of operation. Davy is interested in learning which of the first six months will require cash outlays of more than $40,000 toward the purchase of materials. Each unit requires 5 pounds of material at $10 per pound. All material is purchased in the month prior to its expected use. Purchases are paid for 10% in the month of purchase, 40% in the month following the month of purchase, and 50% in the second month following the month of purchase.
Compute the total amount paid for February.
UNITS
Purchasing Activity (Month prior to production)
Total Pounds used in Production
Total materials cost
Paid in Month
(10%)Paid in Month Relating to Prior Month
(40%)Paid in Month Relating to Two Months Prior
(50%)Total
Paid in month
January
800
4,000
February
500
2,500
March
1,200
6,000
April
700
3,500
May
900
4,500
June
600
3,000
Totals
$18,500
$16,000
$38,500
$20,000
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