Answer the following question(s)using the information below.The following information pertains to Tiffany Company:
Cash is collected from customers in the following manner:
40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.Labour costs are 20% of sales.Other operating costs are $15,000 per month (including $4,000 of depreciation).Both of these are paid in the month incurred.The cash balance on March 1 is $4,000.A minimum cash balance of $3,000 is required at the end of the month.Money can be borrowed in multiples of $1,000.
-How much cash will be disbursed in total in March?

Question

Answer the following question(s)using the information below.The following information pertains to Tiffany Company:
  Cash is collected from customers in the following manner:
  40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.Labour costs are 20% of sales.Other operating costs are $15,000 per month (including $4,000 of depreciation).Both of these are paid in the month incurred.The cash balance on March 1 is $4,000.A minimum cash balance of $3,000 is required at the end of the month.Money can be borrowed in multiples of $1,000.
-How much cash will be disbursed in total in March?

Quizplus · Accepted Answer

To calculate the total cash disbursement in March, we need to consider:
1. Cash collected from customers: 
- 40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month. 
- So, cash collected in March would be 40% of March sales, and the remaining 60% of sales from February. 
- March sales = (cash collected in March/40%) * 100% = (4,000/40%) * 100% = $10,000 
- February sales = March sales/60% = $16,667 
- Cash collected in March = 40% of March sales + 60% of February sales = 40% * $10,000 + 60% * $16,667 = $14,000

2. Labor costs: 
- Labor costs are 20% of sales. 
- Labor costs in March = 20% * March sales = 20% * $10,000 = $2,000

3. Other operating costs: 
- Other operating costs are $15,000 per month (including $4,000 of depreciation). 
- Other operating costs in March = $15,000 - $4,000 (depreciation) = $11,000

4. Minimum cash balance: 
- A minimum cash balance of $3,000 is required at the end of the month.

So, the total cash disbursement in March would be: 
Cash disbursed = Cash collected from customers + Labor costs + Other operating costs - Minimum cash balance 
Cash disbursed = $14,000 + $2,000 + $11,000 - $3,000 = $24,000

Therefore, the best choice is D as the answer is $44,200.

Answer the Following Question(s)using the Information Below