BH Engineering Limited purchases all its goods on credit. On average, 60% are paid for in the month following purchase, 20% in the month after that and 20% in the month after that.
Purchases of goods are budgeted as follows for the second half of 201X:

How much cash outlay will be budgeted in respect of credit purchases for the month of November 20X4?

Question

BH Engineering Limited purchases all its goods on credit. On average, 60% are paid for in the month following purchase, 20% in the month after that and 20% in the month after that.
Purchases of goods are budgeted as follows for the second half of 201X:

How much cash outlay will be budgeted in respect of credit purchases for the month of November 20X4?

Quizplus · Accepted Answer

To calculate the cash outlay in November, we first need to figure out how much of the purchases made in October are still to be paid for in November.

20% of the October purchases will be paid for in November, which is £500 x 20% = £100.

Then, we need to calculate the total amount of purchases to be made in November, which is £4000.

60% of this will be paid for in December (£2400), 20% will be paid for in January (£800), and the remaining 20% will be paid for in February (£800).

Therefore, the total cash outlay in November will be £100 (from October purchases) + £4000 (November purchases) = £4100.

However, we also need to subtract any early payment discounts offered by suppliers. There is no information provided in the question about any discounts, so we cannot make this adjustment.

Therefore, the best choice is C. £4940.

BH Engineering Limited Purchases All Its Goods on Credit