Hammond's Cookie Toppings makes payments on its inventory purchases as follows: 30% in the month of purchase, 65% in the following month, and 5% in the second month following purchase. Budgeted inventory purchases for June, July, and August are $$16,000, $19,000 and $22,000, respectively. What is the budgeted amount of cash payments to account for inventory in August at Hammond's Cookie Toppings?

Question

Quizplus · Accepted Answer

To calculate the budgeted amount of cash payments to account for inventory in August, we need to calculate the payments for each month and add them up.

For June:

30% of $16,000 = $4,800

For July:

65% of $16,000 = $10,400
30% of $19,000 = $5,700
Total for July = $16,100

For August:

65% of $19,000 = $12,350
30% of $22,000 = $6,600
5% of $16,000 = $800 (this is a payment for inventory purchased in June)
Total for August = $19,750

Therefore, the budgeted amount of cash payments to account for inventory in August is $19,750, which is option D.

Hammond's Cookie Toppings Makes Payments on Its Inventory Purchases as Follows