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 April.
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 April.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 April.
Transcribed Image Text: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 April.
January
February
March
April
May
June
Totals
$36,000
$38,500
$42,000
O $40,000
UNITS
Purchasing
Activity
(Month prior
to
production)
Total Pounds
used in
Production
800
4,000
500 2,500
1,200 6,000
700 3,500
900
4,500
600 3,000
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
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