Question

Burr, Inc. provided the following information:

                                                                                        July                            August    

Projected sales                                                       $220,000                    $260,000

Projected merchandise purchases                  $150,000                    $180,000

• Burr estimates that it will collect 60% of its sales in the month of sale, 35% in the month after the sale, and 22% in the second month following the sale. Fivepercent of all sales are estimated to be bad debts.

(Cont.)

• Burr pays 30% of merchandise purchases in the month purchased and 70% in the following month.
• General operating expenses are budgeted to be $20,000 per month of which depreciation is $2,000 of this amount. Burr pays operating expenses in the month incurred.
• Burr makes loan payments of $3,000 per month of which $400 is interest and the remainder is principal.

Instructions

Calculate Burr's budgeted cash disbursements for August.

Answer 1

Burr's Budgeted Cash Disbursement for August is $180,000
Budgeted Cash payment
		July	August
Budgeted Cost of Direct material purchase	a	$      150,000.00	$ 180,000.00
Cash payment
30% Payment for material purchase of current month	b=a*30%	$        45,000.00	$    54,000.00
70% Payment for material purchase of Previous month	c=a*70%	$                       -	$ 105,000.00
Total expected cash payment for Purchase	d=b+c	$        45,000.00	$ 159,000.00
Payment for General Operating expenses (Net of Depreciation)	e	$        18,000.00	$    18,000.00
Payment for Loan repayment	f	$          3,000.00	$      3,000.00
Total Budgeted Cash Disbursement	g=d+e+f	$        66,000.00	$ 180,000.00
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