Jeannie Products Limited purchases all its goods on credit.On average, 70% are paid for in the month following purchase, 20% in the month after that and 10% in the month after that. Purchases of goods are budgeted as follows for the second half of 20X4:
How much cash outlay will be budgeted in respect of credit purchases for the month of November 20X4?

Question

Jeannie Products Limited purchases all its goods on credit.On average, 70% are paid for in the month following purchase, 20% in the month after that and 10% in the month after that. Purchases of goods are budgeted as follows for the second half of 20X4:
 How much cash outlay will be budgeted in respect of credit purchases for the month of November 20X4?

Quizplus · Accepted Answer

The total credit purchases for November 20X4 can be calculated as:
70% of purchases in October 20X4 + 20% of purchases in September 20X4 + 10% of purchases in August 20X4
= (70/100) * £6000 + (20/100) * £5000 + (10/100) * £4500
= £4200 + £1000 + £450
= £5650

However, we need to find the cash outlay, which will be only 70% of the credit purchases. Therefore:
Cash outlay for credit purchases in November 20X4 = (70/100) * £5650
= £3955
Rounding off to the nearest £50, we get: £4150. Therefore, the answer is B.

Jeannie Products Limited Purchases All Its Goods on Credit