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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 March.

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 March.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
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 March.

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 March. January February March April May June Totals $42,500 $40,000 $38,500 O $36,000 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
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 March. January February March April May June Totals $42,500 $40,000 $38,500 O $36,000 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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