The projections of direct materials purchases that follow are for the Sombo Corporation. The company pays for 60 percent of purchases on account in the month of purchase and 40 percent in the month following the purchase.

-What is the expected cash payment for direct materials for the month of January of Sombo?
A)$27,000
B)$79,000
C)$96,000
D)$102,000

Question

The projections of direct materials purchases that follow are for the Sombo Corporation.

The company pays for 60 percent of purchases on account in the month of purchase and 40 percent in the month following the purchase.

-What is the expected cash payment for direct materials for the month of January of Sombo?

-What is the expected cash payment for direct materials for the month of January of Sombo?
A)$27,000 
B)$79,000 
C)$96,000 
D)$102,000

Quizplus · Accepted Answer

The total direct materials purchases for January is $120,000 based on the chart given. 
60% of $120,000 is $72,000, which is the amount paid on account in the month of purchase (January). 
40% of $120,000 is $48,000, which is the amount paid on account in the following month (February). 
Therefore, the expected cash payment for direct materials for the month of January is $72,000.

The Projections of Direct Materials Purchases That Follow Are for the Sombo