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 February of Sombo?
A)$52,000
B)$72,000
C)$89,000
D)$95,000

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 February of Sombo?
A)$52,000 
B)$72,000 
C)$89,000 
D)$95,000

Quizplus · Accepted Answer

The expected cash payment for direct materials for the month of February is equal to the purchases made in January multiplied by the percentage paid in February plus the purchases made in February multiplied by the percentage paid in March.

Expected cash payment for February = (90000 x 0.4) + (98000 x 0.6) 
Expected cash payment for February = 36000 + 58800 = $89,000

Therefore, the best choice is C.

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