Finch Company began its operations on March 31 of the current year. Finch has the following projected costs: (1) Of the manufacturing costs, three-fourths are paid for in the month they are incurred; one-fourth is paid in the following month.
(2) Insurance expense is $1,000 a month; however, the insurance is paid four times yearly in the first month of the
quarter, (i.e., January, April, July, and October).
(3) Property tax is paid once a year in November.
The cash payments expected for Finch Company in the month of April are

Question

Finch Company began its operations on March 31 of the current year.  Finch has the following projected costs:  (1) Of the manufacturing costs, three-fourths are paid for in the month they are incurred; one-fourth is paid in the following month.
(2) Insurance expense is $1,000 a month; however, the insurance is paid four times yearly in the first month of the
     quarter, (i.e., January, April, July, and October).
(3) Property tax is paid once a year in November.
The cash payments expected for Finch Company in the month of April are

Quizplus · Accepted Answer

To calculate the cash payments expected for Finch Company in the month of April, we need to consider the projected costs and their payment terms as follows:

Direct materials: $22,000 - paid in the month incurred (March) = $0
Direct labor: $38,000 - paid in the month incurred (March) = $0
Manufacturing overhead: $16,000 x 0.75 = $12,000 (paid in April) and $16,000 x 0.25 = $4,000 (paid in May)
Total manufacturing costs: $22,000 + $38,000 + $16,000 = $76,000

Selling and administrative expenses:
Insurance: $1,000 - paid in April
Property tax: $6,000 - paid in November
Total selling and administrative expenses: $1,000 + $6,000 = $7,000

Therefore, the total cash payments expected for Finch Company in April are $76,000 + $1,000 = $77,000, and subtracting the property tax that is due in November would give us $77,000 - $6,000 = $71,000.

The only answer choice that is closest to $71,000 is B) $120,600, which is $1,000 (April's insurance) + $12,000 (manufacturing overhead paid in April) + $38,000 (direct labor) + $22,000 (direct materials) = $71,000. Therefore, B is the best choice.

Finch Company Began Its Operations on March 31 of the Current