The following details have been extracted from the budget of a merchandiser. $$\begin{array} { | l | l | }
\hline \text { Rent Expense } & \$ 8,000 \text { per month } \
\hline \text { Depreciation Expense } & \$ 3,500 \text { per month } \
\hline \text { Insurance Expense } & \$ 1,250 \text { per month } \
\hline \text { Miscellaneous Expense } & 2 \% \text { of sales, paid as incurred } \
\hline \text { Commissions Expense } & 10 \% \text { of sales } \
\hline \text { Salaries Expense } & \$ 7,000 \text { per month } \
\hline
\end{array}$$ $$\begin{array} { | l | c | c | c | }
\hline \text { Dec } & \text { Jan } & \text { Feb } & \text { March } \
\hline \text { Sales } \$ 45,000 & \$ 50,000 & \$ 65,000 & \$ 80,000 \
\hline
\end{array}$$ Commission and salaries expenses are paid 50% in the month to which they relate and the balance in the next month.
Rent and miscellaneous expenses are paid as and when they occur. Insurance is prepaid at the beginning of the quarter. Calculate cash payments for the selling and administrative expenses for the first quarter of the next year.

Question

The following details have been extracted from the budget of a merchandiser. $$\begin{array} { | l | l | } 
\hline \text { Rent Expense } & \$ 8,000 \text { per month } \
\hline \text { Depreciation Expense } & \$ 3,500 \text { per month } \
\hline \text { Insurance Expense } & \$ 1,250 \text { per month } \
\hline \text { Miscellaneous Expense } & 2 \% \text { of sales, paid as incurred } \
\hline \text { Commissions Expense } & 10 \% \text { of sales } \
\hline \text { Salaries Expense } & \$ 7,000 \text { per month } \
\hline
\end{array}$$ $$\begin{array} { | l | c | c | c | } 
\hline \text { Dec } & \text { Jan } & \text { Feb } & \text { March } \
\hline \text { Sales } \$ 45,000 & \$ 50,000 & \$ 65,000 & \$ 80,000 \
\hline
\end{array}$$ Commission and salaries expenses are paid 50% in the month to which they relate and the balance in the next month.
Rent and miscellaneous expenses are paid as and when they occur. Insurance is prepaid at the beginning of the quarter. Calculate cash payments for the selling and administrative expenses for the first quarter of the next year.

Quizplus · Accepted Answer

The cash payments for the first quarter include: Rent ($8,000 x 3), Depreciation (non-cash, so $0), Insurance ($1,250 x 3), Miscellaneous (2% of sales for each month), Commissions (10% of sales, 50% paid in the month and 50% next month), and Salaries ($7,000 x 3, 50% paid in the month and 50% next month). Calculating these gives $70,400.

The Following Details Have Been Extracted from the Budget of a Merchandiser