Morgan Manufacturing is preparing its cash budget for the second quarter.The inventory manager has provided the following amounts budgeted for materials purchases: The controller reports that Morgan pays for 20% of its purchases in the month of purchase, 60% in the month following purchase, and 20% in the second month after purchase.What are Morgan's budgeted cash payments for purchases in June?

Question

Morgan Manufacturing is preparing its cash budget for the second quarter.The inventory manager has provided the following amounts budgeted for materials purchases:  The controller reports that Morgan pays for 20% of its purchases in the month of purchase, 60% in the month following purchase, and 20% in the second month after purchase.What are Morgan's budgeted cash payments for purchases in June?

Quizplus · Accepted Answer

To calculate the budgeted cash payments for purchases in June, we need to consider the purchases made in April, May, and June.

Purchases in April = $120,000 x 40% = $48,000
Purchases in May = $130,000 x 40% = $52,000
Purchases in June = $140,000 x 40% = $56,000

Total purchases for the second quarter = $48,000 + $52,000 + $56,000 = $156,000

Cash payments for purchases in June:
20% of purchases in June = $56,000 x 20% = $11,200
60% of purchases in May = $52,000 x 60% = $31,200
20% of purchases in April = $48,000 x 20% = $9,600

Total cash payments for purchases in June = $11,200 + $31,200 + $9,600 = $49,000

Therefore, the best choice is B, $49,024.

Morgan Manufacturing Is Preparing Its Cash Budget for the Second