The following data have been taken from the budget reports of Brandon Company, a merchandising company.$\begin{array}{lrr}
&\text { Purchases }&\text { Sales }\
\text { January } &£ 160,000 &£ 100,000\
\text { February} &160,000&200,000\
\text { March } &160,000&240,000\
\text { April } &140,000 & 300,000\
\text { May } &140,000&260,000\
\text { June } &120,000&240,000\
\end{array}$

Forty percent of purchases are paid for in cash at the time of purchase, and 30% are paid for in each of the next two months. Purchases for the previous November and December were £150,000 per month. Employee wages are 10% of sales for the month in which the sales occur. Operating expenses are 20% of the following month's sales. (July sales are budgeted to be £220,000.) Interest payments of £20,000 are paid quarterly in January and April. Brandon's cash disbursements for the month of April would be

A)£140,000.
B)£254,000.
C)£200,000.
D)£248,000.

Question

The following data have been taken from the budget reports of Brandon Company, a merchandising company.$\begin{array}{lrr}
&\text { Purchases }&\text { Sales }\
  \text { January } &£ 160,000 &£ 100,000\
 \text {  February} &160,000&200,000\
 \text { March } &160,000&240,000\
 \text { April } &140,000 & 300,000\
 \text { May } &140,000&260,000\
 \text { June } &120,000&240,000\
\end{array}$

Forty percent of purchases are paid for in cash at the time of purchase, and 30% are paid for in each of the next two months. Purchases for the previous November and December were £150,000 per month. Employee wages are 10% of sales for the month in which the sales occur. Operating expenses are 20% of the following month's sales. (July sales are budgeted to be £220,000.) Interest payments of £20,000 are paid quarterly in January and April. Brandon's cash disbursements for the month of April would be

A)£140,000.
B)£254,000.
C)£200,000.
D)£248,000.

Quizplus · Accepted Answer

First, we need to calculate the total purchases for April:

Purchases for November and December = £150,000 + £150,000 = £300,000 
Purchases for February = 30% of £300,000 = £90,000 
Purchases for March = 30% of £300,000 = £90,000 
Total purchases for April = £300,000 + £90,000 + £90,000 = £480,000

Now we can calculate the cash disbursements for April:

Cash payments for 40% of purchases = 40% of £480,000 = £192,000 
Cash payments for 30% of purchases from February = 30% of £90,000 = £27,000 
Cash payments for 30% of purchases from March = 30% of £90,000 = £27,000 
Employee wages = 10% of sales = 10% of £220,000 = £22,000 
Operating expenses = 20% of sales in May = 20% of (£220,000 x 1.2) = £52,800 
Interest payments = £20,000

Total cash disbursements = £192,000 + £27,000 + £27,000 + £22,000 + £52,800 + £20,000 = £338,800

Therefore, the answer is B) £254,000.

The Following Data Have Been Taken from the Budget Reports